Skyworks Solutions Inc (NASDAQ:SWKS) Expected to Grow EPS Over 20% the Next Five Years

May 2, 2016

Jeff Fischer, Portfolio Manager at The Motley Fool, says he likes Skyworks Solutions (NASDAQ:SWKS) because of the company’s complex products, expected EPS growth and increasing operating margins.

The company makes analog semiconductor products, mainly integrated modules for smartphones but also for Internet of Things devices, so it’s things like power modulators and antenna amplifiers and Wi-Fi connectivity. So anything that’s getting connected to the Internet is now a possible candidate for a Skyworks Solutions module or product. They sell to all the smartphone makers in the world, and they have other giant customers like Medtronic (NYSE:MDT) and General Electric (NYSE:GE) for Internet of Things devices, medical devices, smart homes, things like that.

The company has about $3.3 billion in annual revenue, $14 billion in market value. It’s expected to grow earnings per share more than 20% annualized the next five years. What’s really great about its solutions are they’re becoming more and more complex to the point that competitors can’t match them, and product lead times are becoming longer and longer, getting Skyworks much more revenue visibility looking forward.

And the company’s margins are going higher. That’s something you certainly don’t hear in a semiconductor-related business most of the time, but Skyworks has enjoyed steadily increasing operating margins and expects that to continue. The stock is about $10 below our fair-value estimate of $85, and we think it could grow about 15% annualized the next five years.

Jeff Fischer