The last time Rule Breaker Sigma Designs
It's only a matter of time before Sigma breaks through to a more reasonable valuation, in my opinion. The IPTV set-top box market is still in its infancy, with AT&T's
Despite all that, the inevitable explosion hasn't happened yet, and the market loves to ignore stocks with small earnings. In the second quarter, Sigma booked $0.05 million of GAAP net income on $73.3 million in revenue, a 43% year-over-year sales gain, but a big step back from the $4.8 million of income reported in the prior-year period. Earnings are lumpy as this fast-growing business balances out the many moving parts of a growing business model.
Sigma's media processors have to compete against offerings from Broadcom
This is important, because MIPS claims the No. 1 market position in digital media products, including Blu-ray players, connected TV sets, and -- yep -- IPTV set-top boxes. And as next-generation wireless technologies WiMAX and LTE become ubiquitous over the next couple of years, MIPS chips like Sigma's systems-on-a-chip have a window of opportunity to move into cell phones, too. So why not start working on Android support right away, both to enable Android-based media boxes and to gain experience with the platform ahead of a possible handset push? Oh, wait, Sigma already does that, too.
Just looking at the numbers, it's easy to miss Sigma Designs' immense growth opportunity. But learn a little bit about the business, and you're suddenly staring a can't-miss investment right in the face. If nothing else, you could take a quick CAPS position on Sigma -- or any other stock -- to help you track its progress.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. Sigma Designs is a Motley Fool Rule Breakers choice. Try any of our Foolish newsletter services free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.