Nordic Semiconductor Stock Analysis: What we will go through here is what they do, their finances, and see if we find any strengths, weaknesses, and what to look out for in the future.
What does Nordic Semiconductor do?
Other than being the bad guys in C&C (NOD), Nordic Semiconductor is engaged in low-energy wireless technology. This technology can be linked to manufacturers such as Apple. It involves chip technology, which is embedded in self-produced goods. See examples in the image below:
The main areas of revenue are directly related to Bluetooth technology, but they have a hand in several other areas. The general thing to understand about NOD is that their income primarily comes from consumer technology, and they have focused on low power consumption. They work on more comprehensive solutions for their products.
Strategy
They focus on strong relationships with their customers, with technology related to low power consumption. Currently, Nordic is working hard to penetrate deeper into the healthcare sector, and if they succeed, NOD will become less dependent on the cyclical economy.
They are currently working on expanding their product portfolio and are increasingly moving towards cloud services with their products.
They focus on three areas:
Short Range IoT:
A fairly large market that covers their main segment with Bluetooth technology.
This involves consumer technology related to mobile phones, smartwatches, audio, and toys.
Medium Range IoT:
Here we are talking about products that utilize Wi-Fi, mainly Wi-Fi 6.
Long Range Cellular IoT:
This includes products like shipping (tracking items), city lights that can be turned on and off, and smart meters.
See examples of this in the product portfolio above.
Financial review
A few years ago, NOD was the growth company that actually made money. A little "joke" since many growth companies start in the red. They had little to no debt and increased sales quite quickly.
We have now seen how dependent Nordic is on consumers personal finances and have gotten a better understanding of what they stand for.
As of today, I feel NOD's financial situation can be categorized as negative. However, this is a quarterly perspective and not a view that is relevant in the long term.
Statement
If you look at both the results and the topline growth from 2014 to 2022, you can see that there is something in the company. Positive results and decent margins, even though the growth in results has not always been steady compared to revenue.
Currently, investments and growth have put NOD in a situation where small customers are no longer as engaged. As the economy weakens, larger customers are also experiencing difficulties. This leads to weakened margins, lower revenue, and for the first time in a long time, NOD has to lay off workers.
Income | Operation profit | Results | EBIT margin | Margin | |
2014 | 167029 | 20248 | 16149 | 12.12% | 9.67% |
2015 | 193068 | 34975 | 24191 | 18.12% | 12.53% |
2016 | 197698 | 9708 | 6424 | 4.91% | 3.25% |
2017 | 236003 | 10450 | 6763 | 4.43% | 2.87% |
2018 | 271134 | 14047 | 8859 | 5.18% | 3.27% |
2019 | 288395 | 9272 | 7327 | 3.22% | 2.54% |
2020 | 405217 | 45714 | 38391 | 11.28% | 9.47% |
2021 | 610528 | 86920 | 71163 | 14.24% | 11.66% |
2022 | 776734 | 161602 | 122339 | 20.81% | 15.75% |
2023 | 542869 | 4702 | 7650 | 0.87% | 1.41% |
Balance
Generally, Nordic Semiconductor has had low debt throughout the entire period we are looking at, and it can be said that they still have low debt/leasing costs.
They have excellent liquidity control and are prepared for a somewhat tough cyclical period. As long as NOD doesn't get sidetracked and lose too much market share, I feel they are in a strong position based on their balance sheet.
Rentebærende gjeld | Gjeld | Equity | Total Assets | Cash | |
2014 | 8678 | 31588 | 95549 | 127137 | 26082 |
2015 | 26720 | 42014 | 116433 | 158447 | 34080 |
2016 | 37100 | 57735 | 118656 | 176391 | 21135 |
2017 | 40955 | 60166 | 127382 | 187548 | 36695 |
2018 | 0 | 45612 | 213673 | 259285 | 103876 |
2019 | 23930 | 86154 | 222890 | 309044 | 90645 |
2020 | 22256 | 113323 | 389637 | 502960 | 242547 |
2021 | 16114 | 138565 | 446055 | 584620 | 279331 |
2022 | 21141 | 192697 | 583544 | 776241 | 379104 |
2023 | 155252 | 260167 | 602078 | 862245 | 290957 |
Cash flow
The cash flow is generally positive, and although 2023 looks daunting, I don't see it as problematic. They have significantly increased their inventory (which is not reflected in the data presented here, amounting to 60,000) and have made 100,000 in prepayments. This makes the cash flow less alarming. One could argue that increasing debt by such an amount is not positive, but based on their liquidity, this doesn't worry me as of today.
Overall, I believe the cash flow is slightly positive, and I look forward to seeing how 2024-2025 will be economically for this company.
Operations | Investment | Finance flow | Leasing | |
2014 | 20979 | -8141 | 7998 | |
2015 | 4366 | -20141 | -4788 | |
2016 | -3400 | -11696 | 7486 | |
2017 | 30880 | -16292 | 0 | |
2018 | 26046 | -27377 | 66832 | |
2019 | 17748 | -28504 | -560 | |
2020 | 59576 | -34844 | 124677 | -3552 |
2021 | 88873 | -28824 | -25234 | -6493 |
2022 | 142711 | -30554 | -11336 | -6609 |
2023 | -119784 | -53502 | 84509 | -8426 |
Key Ratios
Based on the key ratios we see here, you can see that they generally achieve over 10% ROA and ROE. They have low key figures based on debt and good liquidity control.
Unfortunately, I don't have any companies to compare them with, and in some periods the key figures are not good.
D/E | ROA | ROE | Debt-to-EBITDA Ratio | CA/CD | |
2014 | 0.33 | 12.70% | 16.90% | 0.43 | |
2015 | 0.36 | 15.27% | 20.78% | 0.76 | |
2016 | 0.49 | 3.64% | 5.41% | 3.82 | 3.55 |
2017 | 0.47 | 3.61% | 5.31% | 3.92 | 3.43 |
2018 | 0.21 | 3.42% | 4.15% | 0.00 | 4.46 |
2019 | 0.39 | 2.37% | 3.29% | 2.58 | 3.29 |
2020 | 0.29 | 7.63% | 9.85% | 0.49 | 4.34 |
2021 | 0.31 | 12.17% | 15.95% | 0.19 | 3.89 |
2022 | 0.33 | 15.76% | 20.96% | 0.10 | 3.81 |
2023 | 0.43 | 0.89% | 1.27% | 3.17 | 5.34 |
Strengths
Good potential for further growth and recovery
Technological company linked to ASK
If the trend reverses, dividends may be possible
Good liquidity
Product line compliant with EU and climate-friendly based on low power consumption
Potential in several defensive areas such as health, food production, and government infrastructure improvement like light control
Weaknesses
Extremely dependent on consumers
Large customers seem to have a significant influence
Demonstrated weakness in 2023
Very weak Q4
What to keep an eye on:
Behaviour changes after the new CEO
Whether they can turn things around (the economy in the next quarters)
Consumers' liquidity (interest rates)
Nordic Semiconductor Stock analysis summary:
Nordic Semiconductor is a very interesting company that produces chip technology for wireless technology. They are expanding into multiple segments and aiming to enter more defensive areas over time. They have faced challenges with consumer economy and the tough market, which have revealed weaknesses in the company.
For me, I see NOD as a company that could be a good buy, as long as one is aware that the next quarters may be weak. If they manage to acquire more customers in the healthcare sector and among governmental entities, it could help address current weaknesses.
I look forward to following NOD further, and I am seriously considering investing in this stock.
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