My thoughts on AMBA
We’re investing in AMBA because of:
Great growth of revenue and earnings.
Great prospects for the future.
Reasonable PE in relation to its growth rate.
Which gives a low 1YPEG of 0.34 currently.
The stock had shot up THIS MONTH from $90 to $126 based on:
Great earnings reported in early June.
Excitement over the emerging prospects for the company with the addition of drones.
Momentum buyers (who probably didn’t know anything about the company except that it was going up).
A short squeeze, of shorts (who probably didn’t know anything about the company either except that they had thought it had gone up too much,) who shorted too early, $25 before the top, and then were forced to cover as it kept rising.
So how is our original hypothesis?
Revenue Growth?
2012: 25.9 27.8 35.7 31.5 = 121.1
2013: 33.9 37.7 46.0 40.0 = 157.6
2014: 40.9 47.0 65.7 64.7 = 218.3
2015: 71.0
Great Revenue growth. Clearly even accelerating the last three quarters. And how about adjusted earnings?
2012: 11 23 31 18 = 83
2013: 21 26 37 26 = 110
2014: 25 37 68 68 = 198
2015: 71
Wow! Enormous acceleration the last three quarters! How is our original hypothesis doing?
Growth of revenue: rapid and accelerating
Growth of earnings: rapid and accelerating
Reasonable PE: A little less than 39
Rate of earnings growth (TTM): 114%
Rate of earnings growth (last three quarters): 135%
Rate of earnings growth (last quarter): 184%
1YPEG Low: 0.34
Are we happy with this as an investment? Of course! Is there any bad news that would change our opinion? No!
Let’s relax!
Saul