Current earnings may not mean much to future value of GNSS. The shorts in particular, and those who are worried about high PE stocks will see the high PE ratio, and see a stock about to fall. And they could be right.
But the other argument is the possible future. There I would look at the price to sales ratio. After adjusting for cash, it's about 2. The big variables:
1 Can they crimp infringers, who are hurting margins?
2 Will merger with PXLW allow for higher margins?
3 At what rate will the industry grow?
4 what share of the market will they have?
5 can they fight off SIMG's lawsuit and future lawsuits?
6. Does GNSS management cut it?
My guess answers are
1. A little bit
2. A little bit
3. Unit volume, tremendous growth. Dollar volume, decent growth.
4. GNSS/PXLW will have a very high share of top end market, unknown about low end market
5. Hard to say
6. GNSS has new management. The new guy sounds like a man with a plan, but the old CEO did not run a tight ship, and so there a need for renovation of corporate culture. Management going forward I'd rate at neutral.
With a base PSR of 2, and the potential there, I'd rate GNSS a decent gamble from here, but certainly treat it as a speculative stock and buy it as part of diversification. |
