Why Diodes Shares Plunged

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 Diodes (NAS: DIOD) , a supplier of application-specific standard products to the semiconductor industry, dipped as much as 12% following a disappointing third-quarter earnings report from the company.

So what: For the quarter, Diodes reported a modest 4% rise in revenue to $166.6 million and an adjusted profit of $0.20, which was an improvement over the $0.14 reported in the year-ago period. Diodes attributed its modest revenue gains to strength in Asia and market share gains. Those gains, however, weren't enough to save Diodes from falling $0.01 short of the $0.21 in EPS Wall Street had been expecting the company to report. Diodes' fourth-quarter revenue forecast of $160 million to $167 million also fell in line with the $165.7 million the Street is currently projecting. Following the results, Needham downgraded Diodes to hold from buy.

Now what: This wasn't a particularly strong quarter for Diodes, but it wasn't the poor quarter that today's drop would make it out to be, either. We're currently on the downswing in our latest semiconductor cycle, yet Diodes is one of the few companies that continue to remain healthfully profitable. At just 11 times forward earnings, with $124 million in net cash, and now trading for less than book value, today's drop might merit a closer look at what I feel is a long-term winner.

Craving more input? Start by adding Diodes to your free and personalized Watchlist so you can keep up on the latest news with the company.

The article Why Diodes Shares Plunged originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.