Synaptics (SYNA, Financial) has been riding the growing demand for smartphones and tablets, apart from an improving PC market. Synaptics' fourth quarter net revenue was $314.9 million, an increase of 37% from the net revenue of $230.2 million for three months ended June 30, 2013. It expects solid September quarter revenue in the range of $275 to $295 million, an increase of 24% to 33% over the same period last year.
Synaptics reported non-GAAP net income of $56.8 million, or $1.46 per diluted share for the fourth quarter of fiscal 2014, an increase of 16% from net income of $48.9 million, or $1.39 per diluted share for the same quarter last year.
Touch products will drive growth
Synaptics' leadership in touch is believed to propel another robust year of 20% revenue growth.
The company is exploring fresh opportunities that are expected to enable it in maintaining a solid level of growth for the long-term coupled with reinforcing its competitive position. Synaptics is able to highly exceed its goals for growth during the year with the acquisition of a new fingerprint ID business.
Synaptics has widened its reach in technological gain by acquiring Renesas SP Drivers in June apart from the key technology of fingerprint authentication.
The management is very excited about the huge expansion opportunities by launching superior display driver solutions to its widespread product portfolio, in addition to ramping the integration efforts for its touch and display driver.
Synaptics recently displayed its primary design wins and futuristic solutions to proceed with the advanced offerings for human interfaces. The solid offerings generated by the company during the quarter illustrates its vast hold over the technology market with superior innovation capabilities for both touch and fingerprint solutions.
The healthy fourth quarter results resulted in rising market stability, supported by the launch of new platforms with increasing penetration of its QuickPad products and adding revenue for ForcePad.
Synaptics is believed to lead the competition with a solid product line-up including, TypeGuard, Precision TouchPad and ClickPad 2.0.
It’s also hopeful about technology of SecurePad, which integrates its fingerprint ID solution with the TouchPad, and will launch this fiscal year.
The touchscreen-enabled notebook offerings of Synaptics are believed to expand with the launch of fresh models in the market by the holiday season.
Illustrious clients
The recently launched Microsoft Surface Pro 3 leverages Synaptics’s TouchPad solutions for new device category like Type Covers. The notebook OEM customers of Synaptics, such as Del,l are also utilizing its technology in the Venue 11 Pro 7139.
Synaptics' unique technologies such as fingerprint ID and ClearPad solutions are being adopted in Samsung's 8.4 inch and 10.5 inch Galaxy Tab S tablets.
Further, Synaptics has gained momentum in the tablet segment with Samsung releasing their fingerprint ID solutions in the Galaxy S5 Mini smartphone.
Synaptics expects to introduce its fingerprint touch sensor in the market during the second half of the calendar year.
Alipay has recently selected a FIDO-based authenticator for releasing its mobile payment services in China, employed in its fingerprint ID solution on the Samsung S5.
There’s vast opportunity for the company with its key strengths of innovative technology, combined companies, huge scale to propel revenue and profit growth and unique product offerings for the market.
The high revenue growth is a result of the amazing growth in the mobile division, along with thumbprint sensor technologies.
The display integration solutions category adds to more than 40% of the company’s designs. Additionally, Motorola has employed the Single-Layer On-Cell solutions of Synaptics into their 4.3 inch E and 4.5 inch G models, making these entry-level smartphones top in performance.
Synaptics has also employed its face-detection technology into the Nokia Lumia 630 and 635.
A solid portfolio of solutions allows Synaptics to closely partner with key OEMs for several product implementations. For instance, the ClearPad family of touch solutions are being used in the LG’s new 5.5 inch G3 smartphone.
LG also selected the touch interface of Synaptics for its G Watch.
The In-Cell and ClearPad solutions are also used in the Amazon Fire smartphone and Kindle Fire Tablet.
Synaptics is bound to benefit from the trend of several OEMs entering the market with display integrated solutions by the year end.
Synaptics captured several fresh designs with OEMs such as Gionee, Oppo, ZTE, BBK and Huawei.
The increasing infrastructure investments, coupled with highly familiar local technical support for several other offerings of human interface, has resulted in the expanding penetration of the company in the China mobile market for the past 12 months.
Key statistics and conclusion
According to Yahoo Finance, the trailing P/E and forward P/E ratios of 50.33 and 14.24, respectively, signify the solid cost-cutting efforts of the company. Moreover, it is better than the industry’s average P/E of 33.30. The PEG ratio of 0.81 is impressive and indicates good company growth. Also, the company’s balance sheet looks robust with the current ratio of 2.92. Finally the investors are advised to forget all the short-term lows and invest into Synaptics looking at the company’s bright future, indicated by the CAGR for the next five years per annum of 20.07%, above the industry’s average of 15.18% and expect promising returns in a long run.
