What do you do when you can’t find attractively-priced assets in one market? Try other markets. I’ve lamented the “too far too fast” performance of U.S. semiconductor stocks, but I’ve found some interesting ideas in other places – Renesas (OTCPK:RNECY) in Japan and Dialog (OTCPK:DLGNF) in Europe. While I thought Dialog’s valuation was “just okay” more than a year ago, around the time the company came to an agreement with Apple (AAPL) on its main PMIC business, the shares have noticeably lagged the SOX index since then, despite reasonably good performance.
To be sure, Dialog has work to do. The company has done very well winning new power business with Apple, but progress on non-Apple diversification and growth projects has been more mixed. While I see opportunities in areas like auto PMIC, high-voltage PMICs, and industrial IoT, I need to see actual execution here, and I think that’s a major key to unlocking more value in the market. As is, though, I believe Dialog is meaningfully undervalued on the basis of low-single-digit revenue growth and operating margins around 20%.
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Dialog Has Work To Do, But The Valuation Seems Unreasonably Cheap
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