Shares of Synaptics (SYNA 0.58%) have been hammered in 2022 amid the broader stock market sell-off, but the chipmaker's latest results indicate that it could be a winner in the long run thanks to the impressive growth drivers it is sitting on.

The company, whose chips are used in multiple applications such as the Internet of Things (IoT), smartphones, and personal computers (PCs), reported impressive growth on May 5 when it released results for its fiscal 2022 third quarter, which ended on March 26. Synaptics' numbers were better than Wall Street was looking for, and its guidance also exceeded expectations.

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Synaptics is riding the growing demand for IoT chips

Synaptics reported fiscal Q3 revenue of $470 million, up 44% over the prior-year period. The company's adjusted earnings jumped a whopping 85% year over year to $3.75 per share. Analysts were looking for $3.55 per share in earnings on $464.6 million in revenue. The impressive growth in Synaptics' top and bottom lines was driven by the robust demand from the IoT segment, which produced 64% of Synaptics' revenue last quarter.

The chipmaker's IoT revenue shot up 99% over the prior-year period to a record $302 million last quarter. The healthy growth of the IoT business also rubbed off positively on the company's margin and earnings. Non-GAAP gross margin exceeded 60% for the first time in the company's history in its fiscal Q3.

The company exited the quarter with an adjusted gross margin of 61.1%, which was a big increase over the year-ago period's reading of 55.1%. Even better, management guidance indicates it will sustain those robust margins. Synaptics anticipates its fiscal fourth-quarter gross margin will land at 61% at the midpoint of its guidance range. That would be a nice improvement over the prior-year period's figure of 57.5%.

What's more, Synaptics' revenue guidance of $475 million is also solid. That would equate to 45% year-over-year growth and easily exceed analysts' consensus estimate of $466.7 million. It is also worth noting that the IoT business is expected to produce 69% of the company's revenue this quarter as compared to 50% a year ago, which explains why Synaptics expects a nice pop on its top and bottom lines.

More importantly, Synaptics' IoT business still has a lot of room for growth as its chips are powering fast-growing applications.

Solid long-term growth is in the cards

The growing demand for wireless connectivity will continue to be a tailwind for Synaptics' IoT business. For instance, the company is witnessing robust demand for Wi-Fi 6E combo chips and is pushing the envelope on the product development front by including support for Bluetooth and Zigbee connectivity.

Demand for these connectivity chips is expected to grow rapidly. In September, a Grand View Research report forecast that the Wi-Fi 6 and Wi-Fi 6E market could clock annual growth of nearly 20% through 2028. Meanwhile, a Mordor Intelligence report forecasts that the market for the Zigbee connectivity protocol will grow at an annualized pace of 12.6% through 2026.

Throw in Synaptics' presence in other lucrative areas such as virtual reality headsets and automotive displays, and it's easy to understand why the chipmaker's earnings are expected to grow at an annualized pace of 15% for the next five years. However, it won't be surprising to see it grow faster as it is gaining traction in potentially huge markets.

Demand for Synaptics' virtual reality display drivers is rising, and management believes that it is well-placed to take advantage of this emerging opportunity thanks to its already-healthy market share. The company also claims that it has scored multiple design wins in the automotive market that should help it maintain its dominant position in that space. Synaptics says that its automotive customers will start making cars using its chips in the second half of the year, which should give its growth another boost.

In the end, Synaptics seems capable of maintaining its high pace of growth in the long run. That's why investors should consider scooping up Synaptics shares now, as it is trading at just 10 times forward earnings, as compared to the S&P 500's forward earnings multiple of 18.