Why Silicon Motion Technology's Shares Dropped

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 Silicon Motion Technology fell as much as 14% today after the company released earnings.

So what: Net sales fell 19% from the fourth quarter to $57.4 million, coming in just ahead of estimates. The real downside was on the bottom line, where earnings per share dropped more than 50%, to $0.17, $0.05 short of estimates.

Now what: The decline in revenue was driven by mobile storage and mobile communications products, two cores of the company. The stock is trading at just five times forward earnings estimates, but the declining revenue and earnings has a value trap written all over it. I'm staying away from this stock today, and need to see operational improvement to be a buyer.

Interested in more info on Silicon Motion Technology? Add it to your watchlist by clicking here.

The article Why Silicon Motion Technology's Shares Dropped originally appeared on Fool.com.

Fool contributor Travis Hoium 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.