Himax Technologies, Inc. Up 272% Since November; Another Possible Double

HIMX stockHimax Stock to Surpass $1 Billion in Revenue

There aren’t many U.S.-listed stocks based in Taiwan, so that makes Himax Technologies, Inc. (NASDAQ:HIMX) unique.

Himax is a developer of innovative display imaging processing chips. The majority of consumer electronic products may be using HIMX technologies or some of its thousands of patents.

Himax Technologies, Inc.’s products include mobile devices such as smartphones and tablets, along with televisions, laptops, monitors, digital cameras, and car navigation systems.

On the chart, HIMX stock had been drifting along in a narrow sideways consolidation channel between $2.00 and $5.00 for the majority of 2019 and 2020, prior to the recent upward takeoff.

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With the surge, Himax stock is up a staggering 272% over the last three months.

Chart courtesy of StockCharts.com

The situation for HIMX stock looks technically overbought after the spike. This makes Himax stock vulnerable to selling, which could provide a better entry point to investors who missed the initial takeoff.

Revenue Acceleration Bodes Well for HIMX Stock

Himax Technologies, Inc.’s revenue picture was inconsistent in the four years prior to the 31.8% surge to a five-year high of $887.3 million in 2020.

Fiscal Year Revenues (Millions) Growth
2016 $804.3 -9.5%
2017 $687.9 -14.5%
2018 $723.9 5.3%
2019 $673.1 -7.0%
2020 $887.3 31.8%

(Source: “Himax Technologies Inc. ADR,” MarketWatch, last accessed February 12, 2021.)

With the expected global recovery from the COVID-19 pandemic, Himax Technologies is expected to ramp up its revenues by 35.2% to $1.2 billion in 2021 before moderating to 4.2% to $1.3 million in 2022. (Source: “Himax Technologies, Inc. (HIMX),” Yahoo! Finance, last accessed February 12, 2021.)

Himax reported generally accepted accounting principles (GAAP) profits in four of the last five years. Last year, the company saw an impressive recovery back to earnings per share (EPS) of $0.30.

Fiscal Year GAAP Diluted EPS Growth
2016 $0.30 10.3%
2017 $0.16 -46.4%
2018 $0.05 -69.2%
2019 -$0.08 -258.9%
2020 $0.30 475.0%

(Source: MarketWatch, op. cit.)

Himax Technologies, Inc.’s outlook for the next two years is encouraging. If everything pans out, the company could ratchet up its profits to $1.09 per diluted share in 2021 and to $1.16 per diluted share in 2022. (Source: Yahoo! Finance, op. cit.)

Himax Technologies has been reporting negative free cash flow, but given its improved revenue and profit picture, I wouldn’t be surprised to see the company generate positive free cash flow in 2021.

Analyst Take

The expectation that Himax Technologies, Inc. will become a billion-dollar-revenue company this year is encouraging.

Despite the strong move in Himax stock, the shares still trade at a relatively attractive 14 times the company’s consensus 2021 EPS estimate.

Himax’s price/earnings to growth (PEG) ratio of 0.31 is extremely cheap, suggesting the company is trading at a significant discount to its estimated five-year compound annual growth rate (CAGR) for earnings.

In my view, even if HIMX stock doubles, the valuation will not look out of place.