Over the past 5 years, Xilinx stock has more than doubled, which starts to tell quite the story. The maker of FPGAs has benefited from being one of the leading companies in an industry that has seen a resurgence in past years in terms of product demand. Investors have taken notice, and Xilinx (XLNX) was certainly a hot stock in 2017. What about 2018 and beyond? How financially strong is Xilinx?
Looking at the charted EPS, Xilinx continues to impress. The industry is still solid moving into 2018 and beyond, and the possibilities are strong. As a company, Xilinx is financially solid, as solid as you would expect any large corporation to be in this day and age in order to promote investor confidence. The one thing that might hold Xilinx back in the short term is that investors have inflated the SP or share price.
The current P/E or price to earnings ratio for Xilinx stock is 36.843. That isn’t horrible by any standards, but it’s a little high in terms of what value investors are looking for. In order to see XLNX continue to surge this year like it has been over the past five years, the momentum would have to be quite dramatic. Otherwise, earnings reports would be solid, the dividends paid, and the SP would remain a little stagnant for now, until you see that P/E ratio dip, or some exciting news hits the press.
That’s why Xilinx stock has been a little volatile in recent months. It hasn’t been on a decline by any stretch of the imagination. Had it not been a stock that was on fire, it would remain stagnant. Yet the stock still has quite a lot of investor interest, meaning there are plenty of trades going on. Investors are trying to get in on the gains they missed, confident buy and hold investors are adding shares and some people are simply deciding that it’s time to take profits.
The market cap for the company is a solid $18.5 billion. The company pays a healthy dividend, too, especially for its sector. The SP is only $7 from its 52 week high, and the 52 week low is $12 under the current share price. Volume has slowed down a little for Xilinx lately, which also represents consolidation. That current share price of $72 is a great buy opportunity in my honest opinion, but value investors could place a limit order to see if they are picked up at under $70.
It would be unwise to try and think that you’re going to pick up Xilinx at $65 or lower. As a matter of fact, I wouldn’t try to place a limit order for anything below $68. The $70 price target is okay. If you’re trying to be cheap on that end, however, you might be better off selling a put option with a target price of $68. That way you watch the stock rise and pocket the premium. If it were to dip to $68, however, you would get the 100 shares of Xilinx at the price you want.
Selling a put option might be the best way for a value investor to approach this stock. That is because the market momentum for Xilinx is definitely in the company’s favor. Next earnings report, you could even see this stock test $80. You just never know, but one thing for sure is the company has rock solid financials.
When looking at the financial strength of a company, it’s important to make comparisons with other companies within a sector. As mentioned, Xilinx is at the top of its class. The company has almost double the working capital compared to the industry average. That divide is even greater when you factor in the revenue, which highlights the growth of Xilinx as a company.
It’s also important to note the popularity of FPGAs and where the market is heading. You’ve got people riding the wave of semiconductor stocks, and you’ve got the market slowing down a little as a whole. All you see here is that everything is kind of cooling off, kind of like an engine that has outperformed without redlining. Considering how Xilinx is still primed for growth, this represents about the best current buy opportunity that you’re going to get.
A few months ago, you could have bought in under $65 once again. That was after a little reset when the momentum started to slow for the time being. Now you don’t want to look at anything under $70 or $68, unless you’re simply selling a put option. You might as well just jump on board if you’re a believer that Xilinx will do well in the future as a company. The stock is set to outperform, and you don’t have to take my word for it.
Pour over the financials yourself, including SEC filings. Do your due diligence and look at what the analysts have to say. I have been following this stock for quite some time. I also ghostwrite articles about FPGAs, and while I’m not a programmer, I’m an investor that sees the potential. I am well aware of where the market is heading in terms of FPGAs.
It would be my expectation that in a year’s time, XLNX is priced at $100+ a share. The company continues to increase its dividend and did so again this past quarter. That is another sign that a company is financially stable. It’s not every day that you get to invest in a company that is focused on huge growth and still pays a significant dividend. Usually, a company is focused on one or the other.
Growth companies do pay dividends, but Xilinx is above the bar in terms of growth with their xilinx data sheet. It has enough money to pay a stable dividend that keeps growing and still fuel its business that is primed for increased growth heading into 2018 and beyond. This company is a great opportunity for investors who are looking to pick up a growth stock that is currently about to naturally readjust itself to undervalued.