Each year, we take a look back in order to look ahead. We do this by industry, by trend, and ultimately by stock. Here's a closer look at MIPS Technologies (Nasdaq: MIPS) Fool-style.

Foolish facts


MIPS Technologies

CAPS stars (out of 5) **
Total ratings 219
Percent bulls 86.8%
Percent bears 13.2%
Bullish pitches 30 out of 31
Highest rated peers ON Semiconductor, O2Micro International, Monolithic Power Systems

Data current as of Dec. 29.

Color me surprised by how Fools rate MIPS. Just two stars? History must be informing the rating. Semiconductors are a cyclical business, and in years past MIPS hasn't played in the highest growth areas of the industry: home entertainment and networking devices, mainly. But that may be changing.

MIPS has begun challenging ARM Holdings (Nasdaq: ARMH) in developing multithreading chips for smartphones. Thanks to a deal with Google (Nasdaq: GOOG), several new Android devices will be powered by MIPS technology.

"Probable 18% annual earnings growth over the immediate future; this business is highly levered to growth in the hand-set, mobile computing market which is growing world-wide. ... This company licenses its designs for chips and thus has no exposure to manufacturing costs, making this a high-margin, very attractive investment because licensing revenue is on-going when products are successful," wrote Foolish investor mimihoohoo2 earlier this month.

Looking back to look forward
Most often, the optimists that reigned in the year's big MIPS Technologies stories at Fool.com:

But don't take my word for it. Check out MIPS' extraordinary financial performance:

Fiscal 2010-11 Performance

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Revenue growth (25.3%) (0.9%) 84.6% 50.5%
Normalized net income growth (73.5%) (36.1%) 9,613.9% 273.6%
Gross margin 99.4% 99.6% 97.5% 97.4%
Return on capital 15.9% 21.9% 41.9% 41.7%

Source: Capital IQ, a division of Standard & Poor's.

And here's what analysts expect from MIPS Technologies over the next two years, according to data compiled by Capital IQ:

Capital IQ Estimates



Revenue estimate $87.1 million $95.9 million
Normalized profit per share estimate $0.51 $0.60

Source: Capital IQ. Data current as of Dec. 29.

Foolish outlook: bullish
Only the blind or perma-bull would assert MIPS is cheap at current prices. The stock trades for 26 times the consensus 2012 earnings estimate. MIPS has to at least make good on that number -- or do a great deal better -- in order to guarantee market-beating returns to today's buyers.

And yet I like the odds of exactly that occurring. Android is growing into a pervasive mobile operating system. MIPS' early advantage in creating compatible chips for Android devices should lead to the sort of outsized growth investors are hoping for.

Now it's your turn to weigh in. What do you think of MIPS Technologies' prospects at current prices? Use the comments box below to explain your thinking. You can also join me in rating MIPS Technologies in Motley Fool CAPS.

What will be next year's best stock? The Motley Fool has created a brand new free report called The Motley Fool's Top Stock for 2011. In it, we reveal the little company set to profit from the broadband Internet expansion. Get instant access by clicking here -- it's free.

Interested in more info on the stocks mentioned in this story? Add MIPS Technologies, ARM Holdings, Google, Sigma Designs, Broadcom, or Texas Instruments to your watchlist.

Google and Sigma Designs are Motley Fool Rule Breakers recommendations. Google is also a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Google and Texas Instruments and is also on Twitter as @TheMotleyFool. When it comes to stocks, the Fool's disclosure policy is a lookie-loo.