The slight pullback was to be expected after a more than 50% gain in 4 days, Weds-Mon. But SMMT is just at the beginning of its growth and profitability, IMO. Visual HDL 5.2 just began shipping in November, and sales should remain strong, possibly accelerate even beyond this blistering pace. SMMT appears to have by far the best tools in their "niche": they're easy to learn, save design time (i.e. money), and reduce errors. It's win-win for both SMMT and their customers. Analyst estimates going forward, strong as they are, do not fully reflect this, IMO. Eventually, I believe they will revise their eps figures upward, or be constantly predicting too low. In time of course, it won't matter - the actual results will be what counts, not analyst predictions.
Those 35% margins may be somewhat misleading. SMMT paid no taxes in the quarter. However, the profitability is still very impressive, and as revenue growth continues to outpace costs - SMMT may yet achieve those margins when "fully" taxed. For what it's worth, SMMT is currently my largest holding - that's how strongly I feel about the stock. |
