This year is difficult for Cypress Semiconductor Corporation (NASDAQ:CY). The company’s stock has so far shed 22.8% of its value. Interestingly, this is against only (7) % for the semiconductor market. As such, it is safe to say that the firm is underperforming the market.
Cypress Semiconductor Corporation share price
This year’s performance for the stock is a rollercoaster. Various technical indicators show that the stock could pick up in future. However, this depends on the strategic steps that the company’s executives will take. We shall consider the 14-Day Commodity Channel Index (CCI) for the firm. In particular, the 14-day CCI for Cypress rests at around -187.69. Basically, this coincidence indicator is important in predicting the general trend for a company’s stock price. Usually, a company is on a very strong uptrend if the reading +100 or above. On the other hand, CCI values below -100 indicate that the firm is in a weak price action.
Oversold stock
Furthermore, the opposite values could conveniently help to understand if a stock is overbought or oversold. Based on the CCI reading for Cypress, it is clear that the stock is in a downtrend. Also, the reading tells the investor of an oversold situation for the company’s stock. Interestingly, the 14 day Williams Percent Range (Williams %R) supports the conclusion. At the moment, the Williams %R reading for Cypress’ stock is -91.92. Technically, values below a reading of -80 indicate an oversold situation for the company’s stock. As such, the 14-day Williams %R and the 14-day CCI agree on the fact that Cypress stock is oversold.
Underperforming the market
In addition, the relative strength index (RSI) for Cypress indicators the stock lacks a strong momentum. For instance, the most recent 14-day RSI reading for Cypress stands at 41.37. Usually, such readings range between 0 and 100 and values closer to 100 indicate strong momentum. As is apparent, the 41.37 value shows that Cypress’ momentum is quite low. In essence, RSI is important in helping the investor appreciate a company’s relative strength in the market. As earlier noted, Cypress is clearly underperforming the market by a very large margin. It is true that while the market dropped by 7%, Cypress dropped by more than double this. Further, both the 50-day and the 200-day moving averages establish price resistance. For instance, the MA (50) establishes resistance at 13.48 compared to the present price of 12.95. On the other hand, the MA (200) is 15.70, evidence that price will increase in the long-term.
Source: StockCharts.com
Financial health
Despite the unsatisfactory stock performance, Cypress presents a healthy financial status. With a low level of unsold assets, the company’s balance sheet is positive. Further, the company’s short-term assets can comfortably cover all of its debt. In particular, the ratio of short-term assets to debt level is 1.2x. Further, Cypress substantially reduced the level of debt in relation to its net worth, especially in the last 5 years. Particularly, the debt level to net worth was 140.6% five years ago. Today, that ratio is down to just 46.5%. In addition, cash flow is substantial such that it comfortably covers debt. According to the latest financial results, the cash flow is about 60.5% compared to 20% of the debt. Further, the Q3 results indicate that the company’s earnings cover the interest payments on the debt. Particularly, the EBIT indicates a 3.3x coverage. Despite the not so impressive readings by the most important indicators, the company could pick up performance. During the Q3 earnings report, Hassane El-Khoury, Cypress’ president and chief executive officer expressed his delight for good performance. According to El-Khoury, the company has strategies in place to make the succeeding quarters more impressive. He said, “Our strategy and investments to advance our portfolio of highly-differentiated connect, compute and store solutions are paying off. We are seeing a strong design pipeline leading into the fourth quarter with design activity increasing 23% year-over-year.” Therefore, it is safe to say that there better ahead for Cypress.