Novice Investing - Clear Vision With OmniVision

Date: Thursday 15th 2008f May 2008 07:08:28 PM

Clear Vision With OmniVision - 03/02/2008

By: Hari Wibowo

This past week, our sample portfolio pick, OmniVision Technologies Inc. (OVTI), announced their past quarter's result. We had just actually added OmniVision back to our sample portfolio pick these past two weeks. With an expected EPS of $ 1.67 and hence, a fair value of $ 29.96 per share, there is no hesitation that we should add OmniVision back to our sample portfolio.

Anyway, back to earnings, OmniVision reported net income of $ 22.5 Million or 40 cents per share for the quarter ending on 31st January 2008. The company cited strong design as the cause for its good result. Apparently, larger competitors such as Micron and Texas Instrument could not dent OmniVision's bread and butter business in the image sensor sector. With such performance, OmniVision has reported net income of $ 55.97 Million or $ 1.00 per share for the first nine months of its fiscal year. That is a good result. Even better, OmniVision is blessed with ample cash in its balance sheet, making it more nimble in a challenging environment. For now, OmniVision does not need its cash cushion considering the excellent performance of its financial for the past three months.

Going forward, OmniVision predicts midpoint of 4th quarter revenue of $ 180 Million, which is below $ 194 Million analysts' expectation. However, shares of OmniVision rises 8.5% on this earning release. What gives? Well, we don't basically comment on the day to day basis for the company. We are an avid believer of the concept of fair value and the fact is, OmniVision is trading below fair value at this level. We have explained our reasoning for re-buying OmniVision in our sample portfolio that the company has a fair value of $ 29.96 per share. Before the earning announcement, OmniVision's shares are trading at $ 14.00 level. Thus, it is just one of the many steps by OmniVision to reach its indicated fair value.

Does it matter that OmniVision does not guide revenue 'above' expectation? Not in this case. This is mainly because OmniVision shares had been undervalued on the first place. Well, we are keeping an eye on OmniVision's progress for next quarter's result. If all is alive and well, we firmly believe OmniVision will be trading higher than current price of $ 15.86 per share by then.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding OmniVision Technologies Inc. (OVTI) or any other securities.

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