Is Xilinx Still A Buy?
Over the last 3 months I’ve shown you several reasons in two separate articles to consider buying This AI Stock.
Today I want to answer the question – Is This AI Stock Still A Buy after it released its most up to date earnings.
You can read the full article above.
But if you don’t want to, here’s a quick recap of why I said you should consider buying Xilinx in the past 2 articles.
If you don’t recognize this logo you’re not alone.
Xilinx (XLNX) is the creator of and still “a leader in the field-programmable gate array (FPGA) industry.
FPGA’s are hardware circuits that someone programs to carry out one or more operations based on the programming language that’s been input.
Think of these like CPU’s in a normal electronic device but they allow much more functionality if you expect things to change at all in an industry.
And things change fast in the tech arena, so these are becoming even more popular.
One area is artificial intelligence (AI).
Say traffic get to 100% of normal levels at an intersection…
If this happens you could program the FPGA to see this with AI, sensors, and data to then help instantaneously make the decision to reroute future traffic elsewhere via GPS signals in people’s cars. Or by making the traffic lights slow people down so much that they’re forced to go a different route.
This sounds futuristic because it is… But it’s also coming faster than you think too.
Another usage of FPGA’s today is the advanced drive assistance systems or (ADAS) systems in many recent vehicles.
One example is the lane sensor assistance when you go out of a lane or try to merge, and a car is there… If the car “sees” this in its sensors and data, the car automatically jerks you back into your lane or beeps loudly at you so you can do so.
These are ADAS systems already in usage… And they’re built with FPGA’s
Soon when everything is spitting out data and you need to process information fast an FPGA will become ultra-valuable in many situations.
And today I’m recommending you look at Xilinx stock because it’s not only the leader in this arena… It’s also the creator of FPGA’s.
Over the last 10 years it earned a total of $7.5 billion in total operating profit against a market cap of $24.1 billion as of this writing. And its operating profit margin over the last decade has averaged 30.2% per year.
I look for any company to produce above 10% margins on a consistent basis to consider as an investment.
Its produced $8 billion in total free cash flow in the last 10 years. And its FCF/Sales margin averaged 31.9% every year in this time.
On this metric I look for anything above 5% on a consistent basis.
Plus, it pays an 1.5% dividend just to own its shares.
Xilinx is an amazing company… But it does have one problem right now… Its overvalued.
Its current P/E is 31.7.
Its current P/CF is 21.1.
And its current forward P/E is 34.3.
I consider buying companies that have ratios below 20 on all these, so for now I recommend putting Xilinx on your watchlist and buying it when it’s cheaper.
Not only because it’s a fantastic company now. But also, because it will benefit greatly from the increased usage of FPGA’s as the Internet of Things continues being built out over the next 20 years.
From article #2
This was proved out further on July 30th, 2020 when Xilinx released its 1st quarter 2021 earnings.
EDITOR’S NOTE – Xilinx has a different financial year than most companies do which is why the years seem off.
Revenue was only down 14.5% to $727 million in the 1st quarter of 2021 compared to $850 million in the 1st quarter of 2020.
Operating profits were down 30% to $176 million in the 1st quarter of 2021 compared to $251 million in the 1st quarter of 2020.
And net income was down 61% to $94 million in the 1st quarter of 2021 compared to $241 million in the 1st quarter of 2020.
Xilinx showed enormous resilience in the face of the worst economic issues we’ve seen in 100 years is impressive by itself.
But to add to this the company announced that it bought back 700,000 of its shares. And paid $92 million out in dividends.
While the company remained profitable on an operating income, net income, and cash flow basis.
This shows the great business model the company has. And the resilience of its operations.
For these reasons and the ones in the previous article we recommend you buy Xilinx stock for the long term… When it’s cheaper.
This thesis to buy Xilinx – when it’s cheaper – continued playing out when it released its most up to date quarterly earnings on October 21st, 2020.
Revenues were up 5% from last quarter to $767 million.
Operating profits rose 17% to $205 million compared to last quarter.
Earnings per share rose 108% to $0.79 per share compared to last quarter.
And free cash flow rose by 22.1% to $232 million compared to $190 million in the 2nd quarter of last year before all this craziness with the virus.
The only bad news here?
Its still not cheap enough to buy.
Its P/E is now 43.7.
Its P/CF is 24.6.
And its forward P/E is 36.9.
Continue being patient until its cheap enough to buy… I’ll keep you updated when that happens.
Until then, use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.