SWKS: Is it too late to buy

I’m reposting much of this which is contained in my most previous post. The purpose of this post is to look at SWKS. Is it too late to buy now that the stock has risen 30% in 2 months?

The other purpose of this post is to provide a simplified 3 step approach to Saul’s method:

I own many of the stocks that Saul owns and our top 3 are the same (SWKS, SKX, and BOFI). I’d say that Saul and I probably have about 60% overlap. As an example, let’s look at the top holding in our portfolios: SWKS. It has climbed from the low $70s to $92 in the past 2 months…that’s an increase of more than 30%. Is it overvalued now? Let’s have a look. To simplify Saul’s method, I look at 3 things:

1) Historical adjusted earnings per share growth
We want to see a company that’s growing fast. For SWKS here are the past 2 years of adjusted EPS growth when compared to the same quarter in the prior year (in order of oldest to most recent quarter): 50%, 20%, 20.8%, 21.8%, 29.2%, 53.7%, 75%, 88.1%. The midpoint guidance of the quarter in progress will achieve adjusted EPS growth of 80.6%. So SWKS gets an A+++ for earnings growth. But this alone does not mean that the stock is a good buy so we must go to step 2.

2) Market price relative to the trailing adjusted EPS (then compared to the EPS growth)
So for SWKS we now have a market price of $92 and a TTM adjusted EPS of $3.83/share as of the quarter ending on 12/31/2015. So the TTM P/E is 24. It’s just a number and taken alone it means little. It must be company’s adj EPS growth. So the P/E is 24 and growth rate is 88.1% when taking the most recent quarter. The growth rate when taking the full year’s EPS over the prior year’s EPS is 64.4% ($3.83 vs $2.33). So taken together I give SWKS a solid A. And that’s AFTER the stock price has risen more than 30% over the past 2 months. So far SWKS is looking like a solid buy, but we’re not done yet. Next, we need to go to the final step which is making a determination of the future adjusted EPS growth. This is important because we want to be confident that growth will continue. So on to step 3.

3) Future adj EPS growth assessment
Steps 1 and 2 are pretty basic and mathematical. Step 3 is more of a judgment call based on a lot of information. You will probably see a lot of different opinions. The more information you get the better, but you also need to decide which information is important and which information is not important. For me, the case of SWKS was pretty cut and dry. Management has guided for the next quarter and has given some opinions of what they think is in store for their business for the rest of 2015 and beyond. Listening to the last conference call will be extremely helpful. The guidance for the current quarter is for >80% growth. SWKS is in most mobile devices and devices that need to communicate with other devices (IoT). They’re in multiple markets so seasonality is getting to be less of a factor for them. China, then India, then other emerging markets will move to higher and higher bandwidth devices and SWKS is one of only a handful of companies that can handle this increasing complexity. So to me it seems that they are gaining market share in multiple very rapidly growing markets. They are also increasing their operational leverage. So I would give SWKS another solid A for this third check.

So I believe SWKS is still a bargain. I’d predict that they will hit (conservatively in my opinion) $5 in adjusted EPS in their FY 2015 which ends 9/30/2015 and gets reported in late October or early November. I think SWKS deserves at least a P/E of 25 which would give it a stock of $125 7 months from now. That’s ANOTHER 36% increase from today’s closing price. All I can say is that this is the reason that SWKS is my largest holding.

I do a similar analysis (steps 1-3) on the other companies that I own. So tell me again, why should I care what “the market” is doing?



Great post Chris! Nice analysis.


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You’ve just posted the clearest, simplest explanation of Saul’s investment analysis style. Brilliant. Thank you!

I’m nominating you for an advanced teaching position in Saul’s College of Investment Analysis. :wink:



Here, Here!

I too, thought it was very simply and very well said.
Well done Chris (and Saul).

Thanks to so many great folks on this great board for all the great ideas, analysis, discussion, & education.

Feeling Superlative,

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Great post thank you for sharing!

So for SWKS we now have a market price of $92 and a TTM adjusted EPS of $3.83/share as of the quarter ending on 12/31/2015<

Can I just confirm, do you mean the quarter ending 31st December, 2014 ?

As in you’re looking at the trailing 12 months for the full year of 2014, and not estimating the full year to the end of 2015.

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Can I just confirm, do you mean the quarter ending 31st December, 2014 ?

As in you’re looking at the trailing 12 months for the full year of 2014, and not estimating the full year to the end of 2015.

Yes, my mistake. 12/31/14 is the latest available TTM.


Thanks for a great post Chris.

Thank you so much for your post and the clear analysis.I have been considering swks for sometime and felt I am too late since the stock price had climbed so high. Now i know better
what are your thoughts on NXPI?thanks


Great post!

I only own a few stocks that Saul owns, but SWKS is one - purchased on 8/5/14. At the time of purchase SWKS made up 3.1% of my portfolio but now comprises 4.5%.

Here’s the thing - I’ve been thinking about adding more but have been fixated on the price run-up. Your excellent analysis indicates that it’s still a good time to buy SWKS even with the run-up in share price.

I need to recognize that adding to winners can be great when these companies still have a lot of room for continued growth.

Thank you,
Chris (another Chris)

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Thanks for the excellent write up Chris.

I’ve been thinking deliberating between MIDD, PRLB, and SWKS and you have me convinced to pick up my first third of SWKS. Looking forward to owning this winner.

Thanks again,


up another 3% today…

wish I had the conviction to make this a top 3 holding as so many on this board have done…

I can’t complain too much though…lol