Shares of Himax Technologies (HIMX -0.55%) plummeted more than 10% after the release of its fourth-quarter 2021 results on Feb. 17 as investors took note of potential headwinds that could hurt the company's growth in 2022.

Though Himax outpaced Wall Street's fourth-quarter expectations with tremendous growth in revenue and earnings, management warned that supply chain challenges could play spoilsport. Investors went into panic mode and hit the sell button, but this could be a great opportunity for those looking to add a hypergrowth company to their portfolios.

Let's look at Himax's latest quarterly numbers and check why the stock looks like a solid bet.

Person pointing upward at a rising red line on a wall.

Image source: Getty Images.

Himax Technologies' terrific growth is here to stay

Himax reported fourth-quarter revenue of $452 million, up 64% from the prior-year period. The company's adjusted earnings jumped to $0.85 per share during the quarter from just $0.20 per share in the prior-year period. It is worth noting that Himax's bottom line exceeded the company's guidance range of $0.78 to $0.83 per share, while the gross margin of 51.8% was also higher than the originally expected figure of 50%.

Investors, however, panicked at the company's guidance that calls for a 5% to 9% sequential decline in the revenue. This would put the company's first-quarter 2022 revenue at $420 million at the midpoint of its forecast. Still, investors should note that the guidance points toward impressive year-over-year growth of 36% as compared to Himax's revenue of $309 million in the prior-year period.

Himax anticipates adjusted earnings of $0.70 per share this quarter, which would be a big improvement over the year-ago period's profit of $0.39 per share. So, the company is on track to clock impressive growth this quarter despite the supply chain constraints that the company has been facing.

As it turns out, the demand for Himax's display chips that are used in several applications, ranging from smartphones to monitors to notebooks to tablets to automotive to AR/VR (augmented reality/virtual reality) headsets, is exceeding supply by a huge margin. For instance, Himax was able to serve only select smartphone customers last quarter on account of limited supply. Additionally, the company points out that the supply/demand imbalance is here to stay for the rest of the year.

However, Himax management is taking steps to ensure that it has enough supply of chips at its disposal to serve its fast-growing end markets. The company is striking partnerships with suppliers to secure long-term chip supply and build up its inventory aggressively. Himax says that most of its inventory comprises work-in-process goods that are shipped as soon as they are finished.

These steps can help Himax maintain its impressive growth in the coming quarters, and beyond.

The chipmaker is built for long-term growth

Himax Technologies is on track to benefit from multiple fast-growing end markets. The automotive market, for example, is turning out to be a major catalyst for the company. Himax's automotive sales increased 110% in 2021, and the company anticipates this segment's revenue to double once again in 2022.

Himax controls a 40% share of the global automotive display-driver market, which puts the company in a solid position to benefit from the growing adoption of touchscreens and heads-up displays in vehicles. A third-party research report estimates that the global automotive display market could hit $30 billion in revenue by 2025 as compared to $15 billion in 2018, clocking 350 million units in shipments at the end of the forecast period.

Himax estimates that automotive will become its largest sales contributor this year, and the business should continue to move the needle in a big way for the company given the secular growth opportunity in this segment.

Smartphones and tablets, meanwhile, together generated $177 million in revenue for Himax last quarter. Both segments delivered 30% year-over-year revenue growth despite the supply chain constraints. Himax claims that it controlled nearly 35% of the tablet display driver market in the fourth quarter of 2021, while its share of the liquid-crystal display (LCD) smartphone display market stood at 9%.

Himax is now working on OLED (organic light-emitting diode) display drivers with Chinese and Korean panel manufacturers so that it can capture the next hot trend in display technology. The good part is that its tablet-centric OLED display drivers could go into production in the second quarter of 2022, while it is partnering with top smartphone OEMs (original equipment manufacturers) to develop smartphone OLED drivers.

What's more, the company says that it has secured "meaningful capacity for smartphone OLED drivers" so that it isn't hamstrung by the shortage of OLED display-driver capacity in the coming years. All this indicates that Himax is setting itself up for long-term growth, and it won't be surprising to see the company take advantage of hot tech trends such as the metaverse as well.

The dirt-cheap valuation makes it an enticing buy

Himax Technologies stock is trading at just 4.4 times trailing earnings following its post-earnings drop. That's way lower than its five-year average earnings multiple of 56 and the S&P 500's multiple of 24.

Given the fast pace at which its top and bottom lines are growing, buying Himax Technologies at its current valuation looks like a no-brainer, especially considering that it expects to do well despite supply-related challenges and has secular catalysts to drive growth.