Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Sometimes, life just is not fair. Just last night, things were looking "all systems go" for Synaptics
So what: Synaptics earned $0.50 per share in Q2, a 43% jump from year-ago levels on 20% higher revenues. But Jefferies isn't so sure they can keep this up in the face of eroding market share. Google
Now what: Now, I don't mean to go whistling past the graveyard on this one -- but to me it seems Jefferies' concerns are overdone.
Yes, weak PC sales and share loss in smartphones are troubling trends, but the way I look at these things, they seem more than priced into Synaptics shares today. The most recent numbers suggest the company's generating cash at the rate of about $90 million per year -- enough to give the stock a measly 11x free cash flow valuation today. With long-term profits growth still projected at 19% per year, I think that makes the stock a bargain.
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Fool contributor Rich Smith owns shares of Google. Google is also a Motley Fool Inside Value recommendation and a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written puts on Apple. The Fool owns shares of Apple, and Google. The Motley Fool has a disclosure policy.
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