As the larger semiconductor industry continues to bump along with little-to-no organic growth, Microsemi (NASDAQ:MSCC) too has found its organic growth opportunities somewhat limited in the near term. The good news, though, is that the company has been making real progress with cost-cutting and debt repayment, putting it in a good position to reap meaningful operating leverage and profit growth when underlying demand improves.
Microsemi's quarter was pretty nearly on target with my model, so my post-earnings changes aren't significant. The shares have done alright over the last year, matching the SOX index and beating the major indices, but I don't see major upside left based on the fundamentals. I do think there is a possibility that the growth outlook improves toward the end of the year (and higher revenue drives a higher fair value), but with a 25% move since my last article, I regard this more as a "quality hold" to buy on pullbacks than a must-buy at today's price.
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Efficiency Trumping Growth At Microsemi For Now