SWKS: QRVO reports Q1

SWKS competitor QRVO just reported Q1 2015 results:


It’s the recent combination of 2 companies and there are a lot of restatements and adjustments to GAAP. Anyway, the results do look very good with the company also offering very strong guidance. This should bode well for SWKS as it’s another data point strong that the market(s) that SWKS plays in is growing faster than most people think. But what about QRVO? Is it a stock worth owning too?

TTM Adj EPS is $4.65. The stock is up to about $77 in after hrs trading giving it a P/E of about 16.5. Midpoint guidance for Q2 is $1.05 vs $0.97 from Q2 2014, an increase of only 8.2%. The company’s P/E would drop to 16.2. It’s a low P/E compared with SWKS so the questions are:

  1. What are the Adj EPS growth projections compared to SWKS? SWKS grew YoY revenue 58.4% and QRVO grew 46%. Gross margins are similar at around 50% with SWKS guiding future GMs toward 55%. QRVO is still integrating 2 companies and management expects to gain synergies of $75M in 2015 and $150M in 2016 which would further increase the bottom line.

  2. How does QRVO’s competitive position compare to SWKS? I think this is a key reason to own one company over the other. Unfortunately, I don’t know enough about the details of business to make a good independent and unbiased assessment. Looks like Q1+Q2 total revenue for SKWS will be around $1.56B. QRVO should be around $1.3B so they are similar in terms of sales. Anyone care to offer an expert opinion?

  3. Balance sheet comparison: SWKS has about $1B in cash with virtually no debt and it’s an $18B market cap firm. QRVO has $544M in cash and $394M in LT debt (net cash is about $150M, and it’s a $11B firm. Currently, SWKS balance sheet is stronger, but both look to be in great shape.