| From Briefing.com: 11:34AM ESS Technology (ESST) 21.54 +0.54: ESS Technology, a leading supplier of mixed-signal semiconductor solutions for multimedia applications, checked in with some good news this morning when it raised its sales and EPS guidance for Q1. Specifically, the company said it expects revenues to exceed $75 mln (consensus $69.53 mln) and net income per diluted share to be greater than $0.27 (consensus $0.23). This revision marks the second time in as many months that ESST has increased its guidance. In February, the company forecasted Q1 revenues of $68-70 mln and EPS of $0.22-0.25. The latest revision-- like the first revision-- was attributed to a very strong market for DVD and VCD players and an increase in ESST's market share in the DVD market. Today's news, however, isn't a total surprise. On Monday night, the company's CEO told Dow Jones Newswires that ESST had plans to raise its EPS target. What may come as a surprise, though, is that ESST's stock isn't prohibitively expensive. In fact, it is a value alternative in its fast-growing niche. Briefing.com said as much in a recent Story Stock we wrote on competitor Zoran Corp. (ZRAN). At current levels, ESST trades at 21.1x est. FY02 earnings, yet its valuation looks all the more appealing knowing that the consensus FY02 estimate is bound to be increased following ESST's revised guidance. Moreover, ESST has no long-term debt and close to $3.00 per share in cash and short-term investments on its balance sheet. Speculation that ESST was losing market share to ZRAN, which trades at 51.3x est. FY02 earnings, has acted as a restraining influence from a valuation standpoint, as has the insider selling by Chairman Fred Chan and his family. In light of today's announcement, though, it appears further multiple expansion is warranted as it is clear ESST is making the most of its position in one of the few sweet spots in the technology market and that it is holding its own in the face of competition from the likes of ZRAN. As an aside, ESST also said today it will be providing increased guidance for Q2 when it reports its Q1 results on April 24. Last month, ESST projected Q2 revenues in the range of $66-70 mln and EPS in the range of $0.18-0.22.-- Patrick J. O'Hare, Briefing.com |
