In my previous article on Entropic Communications
Positives vs. negatives
First, let's look at the positives. Entropic has managed to compound revenue at an annual rate of 18% over the past three years. Moreover, its revenues have grown by a staggering 91% from last year on the back of booming sales of its MoCA (Multimedia over Coax Alliance) enabled chipsets . The company more than doubled its earnings in the last quarter from a year ago and continued innovating new products, the most popular one being the latest version of MoCA, which aims to provide improved performance at lower costs.
The downside came in the form of low shipments to one of its most important customers, Verizon
So is the loss of one of its most prestigious customers enough to dismiss a company that's making active moves to expand its business? When we consider that Entropic has extended its business with Intel
With all these concerns, how cheap is the stock now? Let's take a look at how the company is valued against its peers.
|Company||TEV/EBITDA (TTM)||Trailing P/E (TTM)||Forward P/E (NTM)|
Source: Capital IQ.
Entropic is darn cheap when compared with the other chipmakers in the field. But the gap between trailing P/E and forward P/E grabs my attention. The company failed to meet estimates in the just-concluded quarter and lost a major share of its revenue from one of its most important customers. It seems these factors were playing in analysts' minds when estimating next year's earnings.
Although the company has been making some moves to pump up revenue with new partnerships and improved products, it might make sense to wait for the next quarterly results to take better stock of the situation at Entropic. We need to know how much Verizon's loss has affected the company. The fallout will, in all likelihood, be reflected in the next earnings release.
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Fool contributor Harsh Chauhan doesn't own any shares in the companies mentioned in this article. The Motley Fool owns shares of Intel. Motley Fool newsletter services have recommended buying shares of Intel. Motley Fool newsletter services have recommended creating a diagonal call position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.