Will Maxim Integrated Products Inc’s (MXIM) Earnings Grow Over The Next Year?

Analysts covering Maxim Integrated Products Inc (NASDAQ:MXIM) are predicting the earnings to grow 16.4% in years’ time. What are the important facts you need to know? In this article we will look at the latest data and analyse the future performance of this growth stock in more detail. Check out our latest analysis for Maxim Integrated Products

How is MXIM going to perform in the future?

Based on analysts estimates MXIM’s earnings are to grow 33.3% over the next 3 years. That means that we can be expecting the EPS to grow to $2.35 levels.

Maxim Integrated Products (NasdaqGS:MXIM) Past Future Earnings Apr 20th 17
Maxim Integrated Products (NasdaqGS:MXIM) Past Future Earnings Apr 20th 17
This means earnings will be higher than recent years.

During the same time revenue is predicted to grow from $2.23 Billion to $2.51 Billion in 2019 and profit is predicted to slightly grow from $500 Million to $702 Million in 2019, roughly growing 1.4x. Margins are predicted to be extremely healthy during this time as well.

Is the growth built on solid basis?

Maxim Integrated Products has outperformed the average growth in earnings of the Semiconductors industry over the past year.

MXIM has been performing remarkably well with a Return on Equity of 23.3%. This is above the Semiconductors average of 21.2%. This is expected to further improve with the stock estimated to have an outstanding ROE of 28%.

Maxim Integrated Products (NasdaqGS:MXIM) Future Perf Apr 20th 17
Maxim Integrated Products (NasdaqGS:MXIM) Future Perf Apr 20th 17

Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.

Final words

Maxim Integrated Products is a fast growing company, but as Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price“. Is MXIM overpriced? Or could it be considered an undervalued opportunity? I recommend you see our latest FREE analysis to find out!

If you are not interested in MXIM anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.