It's nice to get an early jump on the news sometimes, which is why we're diving into digital media chip maven Sigma Designs (NASDAQ:SIGM) today, a week before its earnings report. Let's get the picture in focus, shall we?

What analysts say:

  • Buy, sell, or waffle? Twelve Wall Street firms follow the company. Nine of them have issued buy ratings on the stock, two are holding, and one analyst wants to sell. In our Motley Fool CAPS investor hive mind, Sigma Designs is a three-star stock based on 185 player ratings.

  • Revenues. The average estimate is $34.2 million, 130% higher than the $14.8 million from a year ago.

  • Earnings. The analyst consensus points to $0.27 of earnings per share, up from a measly $0.02 per share last year.

What management says:
In the latest earnings report, CEO Thinh Tran was all aglow with excitement about Blu-ray players and IPTV set-top boxes. Sigma shipped a million decoder chips to set-top device makers such as Panasonic (NYSE:MC) and Sony (NYSE:SNE) during that quarter, and it expects demand to increase again this quarter.

What management does:
Gross margins are dwindling as digital media processors become more and more commoditized. Industry giants including STMicroelectronics (NYSE:STM), Texas Instruments (NYSE:TXN), and Analog Devices (NYSE:ADI) are but a few of the players reaching for a piece of this pie. At the same time, however, the chips become cheaper to manufacture, and as demand continues to increase, economies of scale kick in to create even more efficient operations. You can tell by the accelerating revenue growth that there is something special going on here, no matter how bumpy the net income ride may be.

Margins

10/05

1/06

4/06

7/06

10/06

2/07

Gross

67.6%

64.9%

61.0%

53.1%

49.6%

49.1%

Operating

(9.1%)

(8.6%)

1.2%

1.2%

6.7%

12.1%

Net

(9.2%)

(4.7%)

4.9%

(1.3%)

1.3%

6.8%

YOY Growth

10/05

1/06

4/06

7/06

10/06

2/07

Revenue

(0.7%)

6.1%

39.0%

80.6%

129.7%

173.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
These days, you can buy a high-definition plasma or LCD television from Pioneer or Hewlett Packard (NYSE:HPQ) with built-in wireless networking -- and a Sigma Designs media decoder engine. Networked and interactive TVs of this kind are leading the way into a whole-house entertainment system where you can finally watch what you want, where and when you want it, whether the content came from a cable feed, a streaming download, or a file stored on your personal computer.

Naturally, this company stands to benefit from such a paradigm shift and wants it to happen as soon as possible. As an informed entertainment consumer, I'm happy to see it all unfold, and I can hardly wait for unfettered access to all my media wherever I go -- inside or outside the house. Judging by the rapid sales increases here, some of those gadgets could very well have Sigma inside. This is an unfettered growth story, and it's not for the faint of heart, but a stoic investor might find the ride stimulating in the end.

No, this isn't an official Motley Fool Rule Breakers pick, though the business trajectory seems to fit that mold. Take a free 30-day trial to our ultimate growth investment service to see what other hyperactive companies have kept Sigma out of that scorecard to date.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, though he finds some of them highly entertaining in and of themselves. You can check out Anders' holdings if you like, and Foolish disclosure will help you tune in to the digital future.