Just glancing at ANAD's Q4 results, the following are my thoughts.
Valuation - they're at about 1.0x 2014 sales, not too cheap or too expensive.
Gross margins were only about 16% in Q4? That's awful for a semiconductor company. Why so low? They do expect GB to improve in Q1, but only to about 20%. From my limited experience, the very uninteresting semiconductor companies have gross margins around 40%, the high tech semi companies have GMs around 50%-65%. 16% gross margin is indicative of extremely commoditized product. Why are ANAD's GMs so low?
Their costs are about $9m per quarter. So....to break even on 20% gross margins, they need quarterly sales of $45m. Sales in Q4 were $21m, and they're going lower in Q1 due to seasonality. How long do you think it will be until ANAD makes a penny EPS? They have to more than double their sales while not adding a single new employee to the salary line.
Sorry, they look awful. I don't know the story, so maybe I'm missing something, but with $9m in quarterly costs, 20% gross margins and a current quarterly run rate of $21m, I don't see why you make BUY case. |
