What happened

Shares of MaxLinear (NYSE:MXL) popped 18.1% this week, according to data provided by S&P Global Market Intelligence. The integrated-circuit maker reported its third-quarter earnings results, beating analyst estimates on both revenue and earnings per share.

So what

After the market closed on Oct. 27, MaxLinear released its earnings for the third quarter, which covers the three months ending in September. Net revenue was $229.8 million in the period, up 47% year over year, while non-GAAP (generally accepted accounting principles) earnings per share hit $0.75, up from $0.32 a year ago. Both numbers beat the consensus analyst estimates for the report.

A semiconductor on a board.

Image source: Getty Images.

MaxLinear serves the broadband, connectivity, and infrastructure markets, providing both analog and digital circuits to companies looking to build out different projects. Chipmakers are in hot demand at the moment with the rising need for integrated circuits, which is raising the demand for MaxLinear's products. 

Management expects this demand to continue into the fourth quarter, as well. The guidance calls for $240 million to $250 million in revenue, which is above the estimate of $228.8 million analysts had going into the results. This combination of beating on revenue and earnings, as well as raising fourth-quarter guidance, is likely why MaxLinear stock is up so much this week.

Now what

After the stock popped this week, MaxLinear now has a market cap of approximately $4 billion. With $197.2 million in trailing-12-month free cash flow, the stock has a price-to-free cash flow (P/FCF) ratio of 20. This is actually below the market average, indicating that investors are less confident that MaxLinear's current surge in demand is sustainable.

However, if you believe that the company's current profit levels and cash flow can grow over the coming years, now seems like a good time to buy, even with the stock up so much this week. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.