What's The Deal With Diodes Stock?

Chipmaker Diodes (DIOD) was rolling right along last year, putting up good sales and profit numbers. Then came the fourth quarter and it downshifted, reporting lower year-over-year profits and sales. Investors apparently saw it as a one-off blip with better days ahead as Diodes stock has continued to advance. On Tuesday, Diodes' Relative Strength (RS) Rating shot up 10 points, from 70 to 80.

Market research shows that the top-performing stocks often have an 80 or better RS Rating as they launch their biggest runs. Diodes just joined that club.

Diodes make its namesake devices, which help regulate current in electronic systems. It also sells transistors, rectifiers and other components to a wide variety of markets including makers of communications systems, home and business electronics, autos, medical systems and industrial gear.

Diodes stock recently completed a long cup base that began in November 2021. It rose above its 200-day moving average on May 1 and continued rising. And it climbed above its 50-day on Friday though it closed below that key benchmark. It popped above it again Monday and rose higher above it Tuesday when it closed just above 90, up about 1% for the day.

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Diodes is trying to complete a consolidation with a 97.55 entry. See if the stock can break out in heavy volume.

The company reported a 9% year-over-year dip in earnings to $1.59 per share earlier this month, on a 3% decline in revenue to $467.2 million. The prior three quarters it recorded 58% EPS growth, then 36% and 8%. During that period its sales grew 14%, 11% and 3%.

Management said on Feb. 6 they expect Diodes first quarter revenue of about $467 million, down from $501 million a year earlier. However, a large number of companies have topped the Street's consensus estimate when they reported Q1 results this year.

Diodes stock earns the No. 6 rank among its peers in the Electronics-Semiconductor Manufacturing industry group. ON Semiconductor (ON) and STMicroelectronics (STM) are among the group's highest-rated stocks.

When looking for the best stocks to buy and watch, one factor to watch closely is relative price strength. IBD's proprietary RS Rating tracks market leadership by showing how a stock's price movement over the last 52 weeks measures up against that of the other stocks in our database.

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