Saturday, October 11, 2014

* Rambus (RMBS) - Massive Turnaround... or a Gigantic Head Fake? (4 Charts)

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RMBS has been a story stock for over a decade filled with promise, law suits, appeals and the risk of bankruptcy.  The stock has been as high as $14.82 and as low as $8.15 in the last 52 weeks.  Today it trades at $10.23.

The future is full of risk, but for now, in four charts we can see what may be the beginnings of a turnaround. This isn't meant as a definitive research piece and it certainly isn't complete. But in four charts, we go from knowing very little, to knowing... considerably more.

Cash Ratio
The ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. It can therefore determine if, and how quickly, the company can repay its short-term debt. A strong cash ratio is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking party. Source:
DEFINITION of 'Cash Ratio'

RMBS has seen its cash ratio increase for dangerously low levels to now over 3.

Gross Margin %
RMBS has gone fro essentially disappearing gross margin % to now a booming 51%.  Even more encouraging is the steady rate of increase.  Still of concern, how quickly it fell last time from the 90% range to single digits.

Net Income Margin %
With gross margin% improving so dramatically, we would hope to see net income (earnings) margin % increasing.  In fact, we do see that phenomenon... rather abruptly.

Revenue (TTM) to Net Income (TTM)
This is the best chart of them all for RMBS.  We can see revenue has spiked ~30% in the last two-years, we know gross margin % and net income margin % are growing, and viola, net income itself is rising.

In fact, for the last two-quarters (in combination), RMBS has shown positive earnings of over $12M.
The most recent four quarters of net income (in thousands) starting with the most recent are:
Turn around time or a nasty head fake and a stock headed to zero?

More on RMBS in future posts.

Knowledge is power. Be Powerful.

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