Silicon Labs Continues To Build On Its Strengths

Committing to the Internet of Things (or IoT) has been a transformative decision for Silicon Labs (SLAB), as this smallish semiconductor company continues to leverage its broad wireless capabilities to benefit from the growth in IoT deployments. These shares are up more than 40% over the past year, and revenue looks on track to continue high single-digit to low double-digit growth for some time, pushed along by the strength in IoT, but also aided by exposure to markets like optical networking and electric vehicles. The company's recent announcement of the acquisition of Sigma Designs (SIGM) furthers the story, adding another wireless standard and a decent chunk of fast-growing revenue with expense synergies.

Silicon Labs has performed well relative to expectations, and the shares are being richly rewarded for the company's above-average revenue growth and improving margins. While I do expect high single-digit revenue growth over the long term (including Sigma) and double-digit free cash flow growth, valuation is definitely in the "bull cycle" part of the range, and I cannot find enough value to get comfortable with the idea of buying for my own account.

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Silicon Labs Continues To Build On Its Strengths