Why Silicom Ltd. Shares Sank Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Silicom Ltd. plunged 17% early Thursday despite better-than-expected first-quarter results from the networking and data infrastructure specialist.

So what: Quarterly revenue rose 26% year over year, to $19 million, which translated to 28% growth in adjusted net income to $4.2 million, or $0.57 per diluted share. Analysts, on average, were looking for earnings of just $0.53 per share on revenue of $18.79 million.

Now what: Silicom historically doesn't provide specific forward guidance, but today's drop still makes little sense considering it performed marginally better than Wall Street had hoped. However, note that Silicom absolutely crushed expectations with its fourth-quarter report three months ago, so the market might have been anticipating yet another huge beat this time. Still, with shares now priced at a reasonable 15 times next year's expected earnings, I think the pullback could represent a perfect buying opportunity for patient long-term investors.

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The article Why Silicom Ltd. Shares Sank Today originally appeared on Fool.com.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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