Xilinx (NASDAQ: XLNX) has been attracting attention from value investors over the past year. But what is Xilinx and why do some value investors buy it?
Xilinx (XLNX) builds integrated circuits for devices that connect computers. The Xilinx products include Field-Programmable Gate Arrays (FPGAs) and Adaptive System on Modules.
Demand for Xilinx’s products is growing. For example, the KRIA Adaptive System-on-Modules improve the operation of artificial intelligence (AI). Other uses for Adaptive System on Modules include controls and scanners. A major use for the Adaptive System on Modules is to control robots and other industrial equipment.
Similarly FPGAs can power the cloud and the internet of things (IoT), increase computer density and scalability and increase computer performance. They design Xilinx’s Artix FPGAs to increase performance, signal processing, and multi-level security, including cryptography and authentication. Thus, the Artix FPGAs could power cryptocurrency.
Cloud products at Xilinx include Data Center Acceleration Cards, System on Modules, and Embedded Software and Ecosystems.
Why Does Mr. Market Love Xilinx?
Mr. Market loves Xilinx (XLNX), he paid $93.10 for its shares on 2 June 2020 and $128.63 for the same shares on 4 June 2021.
Notably, Mr. Market paid a high price of $151.75 for Xilinx on 16 December 2020. Consequently, many people will ask why does Mr. Market love Xilinx?
I think investors buy Xilinx because it is a chip maker. Chip makers such as NVIDIA (NVDA) have seen massive share value growth over the past year. Notably, NVIDIA’s share price rose from $353.01 on 2 June 2020 to $671.10 on 2 June 2021.
Demand for chips is high because of the growth of the cloud and disruptions to the semiconductor industry. Elon Musk, for instance, complains a microchip shortage is disrupting production at Tesla (TSLA), Electrek reports.
Soaring demand for devices has created a chip shortage that could last until 2023, CNBC reports. That shortage is driving surging revenues at the 10 top chip makers, CNBC claims. I think investors are buying Xilinx because it is a cheap semiconductor company.
How Much Money is Xilinx making?
Xilinx (XLNX) makes money from its microchips. Xilinx’s quarterly operating income rose from $178.03 million on 31 March 2020 to $199.78 million on 31 March 2021.
Similarly, Xilinx’s quarterly gross profit rose from $525.03 million on 31 March 2020 to $567.62 million on 31 March 2021. In contrast, the quarterly operating cash flow fell from $345.35 million on 31 March 2020 to $240.03 million on 31 March 2021. However, the quarterly operating cash flow rose to $360.14 million on 31 December 2020.
Interestingly, the quarterly ending cash flow fell from $485.62 million on 31 March 2020 to $312.96 million on 31 March 2021. Notably, the quarterly ending cash flow rose to $1.227 billion on 30 April 2020.
The ending cash flow rose because Xilinx reported a quarterly financing cash flow of $585.09 million on 30 April 2020. The financing cash flow is not a problem because Xilinx pay its debts. Xilinx reported a quarterly financing cash flow of -$484.23 million on 31 March 2021.
Overall, Xilinx’s total debt grew from $1.306 billion on 31 March 2020 to on $1.544 billion on 31 March 2021. Hence, Xilinx has more debt, but it pays that debt.
What Value does Xilinx have?
The value at Xilinx (NASDAQ: XNLX) is growing. For example, Xilinx’s quarterly revenues rose from $756.17 million on 31 March 2020 to $850.99 million on 31 March 2021.
Moreover, Xilinx’s quarterly revenue growth rate rose from -8.72% on 31 March 2020 to 12.54% on 31 March 2021, Stockrow estimates Thus, the growth rate has risen by around 20% over the past year.
Importantly, Xilinx’s cash and short-term investments grew from $2.267 billion on 31 March 2020 to $3.079 billion on 31 March 2021. Thus, Xilinx has more cash.
The value is also growing Xilinx’s total assets grew from $4.693 billion on 31 March 2020 to $5.519 billion on 31 March 2021. Thus Xilinx added cash and value during a pandemic.
Is Xilinx a value investment?
I consider Xilinx (NASDAQ: XLNX) a value investment because it is a company with a cheap stock that is adding cash and value. In addition, I think Xilinx has a high margin of safety because of the rising cash.
Xilinx also pays an attractive dividend. For instance, Xilinx paid a quarterly dividend of 38₵ on 2 December 2020. However, Xilinx has not paid a dividend since 2 December 2020. Impressively, the dividend rose from 37₵ on 2 February 2020 to 38₵ on 12 May 2020.
I think Xilinx management has suspended the dividend until the pandemic and the chip shortage end. However, Xilinx has a history of paying out an impressive dividend.
If you are seeking a value investment in chips that with a dividend history, I think Xilinx is worth a look. This company is cheap and obscure and it makes money. If you want a low-cost alternative to NVIDIA, Xilinx could be your stock.
Originally published at https://marketmadhouse.com on June 4, 2021.
