![]() ![]() The Motley Fool has a disclosure policy.Ĭopyright © 1995 - 2013 The Motley Fool, LLC. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. IPHI AT SPOTT FREETry any of our Foolish newsletter services free for 30 days. The Motley Fool has no position in any of the stocks mentioned. ![]() He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Seth Jayson had no position in any company mentioned here at the time of publication. The article Inphi Turns More Into Less originally appeared on. Check out the semiconductor company that Motley Fool analysts expect to lead "The Next Trillion-dollar Revolution." Click here for instant access to this free report. Is Inphi the best semiconductor stock for you? You may be missing something obvious. With recent TTM operating margins below historical averages, Inphi has some work to do. TTM net margin is -22.7%, 2,580 basis points worse than the five-year average. TTM operating margin is -8.7%, 1,160 basis points worse than the five-year average. TTM gross margin is 64.2%, 170 basis points better than the five-year average. Net margin peaked at 31.4% and averaged 3.1%. Operating margin peaked at 14.7% and averaged 2.9%. Over the past five years, gross margin peaked at 64.6% and averaged 62.5%. You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. If it can't make up for this problem by cutting costs - and most companies can't - then both the business and its shares face a decidedly bleak outlook. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it sells more units while keeping costs in check, its profitability increases. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. ![]() ![]() Unfortunately, a look at the most recent numbers doesn't tell us much about where Inphi has been, or where it's going. Here's the current margin snapshot for Inphi over the trailing 12 months: Gross margin is 64.2%, while operating margin is -8.7% and net margin is -22.7%. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Inphi's competitive position could be. That's why we check up on margins at least once a quarter in this series. Healthy margins often separate pretenders from the best stocks in the market. The more Inphi ( NYS: IPHI) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. ![]()
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