Wednesday, April 27, 2011

inTest Corp -- looking cheap and threatening to breakout

I have a stock screener setup that looks for stocks with several fundamental growth characteristics combined with two technical characteristics. Here's how it looks:

  • Company is profitable; ie, PE above zero
  • Quarterly YoY sales growth positive
  • Quarterly YoY earnings per share growth positive
  • Return on Equity over 20%
  • Debt to Equity ratio under 1
  • Stock's performance is 5% above the S&P 500
  • MACD just turned bullish
To this list I added one more criteria: price should be under $5.

Two stocks popped up:
  • Full House Resorts, Inc. (FLL) - a company in the Consumer Services-Misc. Amusement & Recreation sector
  • InTest Corp. (INTT) - a company in the semiconductor automated test equipment sector
Since I tend to be most interested in tech stocks, let me focus on inTest.

inTest specializes in the hardware that interfaces between probes and the chips being tested. It also offers thermal testing equipment including test chambers. At a market cap of $42 million, they fall into the microcap category.

The stock must be quite overlooked as it's valuation appears to be quite cheap. The PE is less than 6, Price to Sales is less than 1, Enterprise Value/EBITDA is under 5 and PEG is only 0.34. As mentioned above, the screen requires the stocks to be profitable and inTest certainly is as well as being cash flow positive.

Furthermore, the stock appears to be working on breaking out. Here is the chart:


Note the reversal above the blue trend line and the surge above the 50-day moving average in addition to the bullish move in MACD.

Though profitable, the company has been facing some financial headwinds. The following chart shows that year-over-year sales and earnings were good but the last few sequential quarters have shown declining results.

The stock will report earnings next week so we'll see if they can show some better sequential results. In the meantime, however, it is worth noting that there have been a number of acquisitions in the semiconductor test equipment sector. inTest themselves recently bought a German firm. In any case, the sector is ripe for consolidation as many of the companies operating in the sector are small but profitable.

In summary, inTest is a tech stock mired in deep value territory but with its technicals turning positive. It's potential to be a takeover target make it an interesting play but it makes sense to wait a few more days until those earnings are reported.

Disclosure: no positions in any stocks mentioned in this post



Monday, April 25, 2011

Working to overcome "Registration Reluctance" and gain your trust

A couple of weeks ago I started writing about my new investing site, TradingStockAlerts.com, and encouraged readers to check out the new Premium Stock Screener. I'd like to take this opportunity to let you know that I have made it easier than ever to access the screener and other password-protected parts of the site.

When I set up the Premium Stock Screener, I required that users register at the site in order to use it. I offer a free account but I now realize that I was making an unnecessary demand on potential users. After all, creating a login is a pain in the you-know-what and we all have too many logins and passwords to remember these days anyway.

It turns out that things can be much simpler and easier and I'm excited to share with you how much better the setup is now.

First of all, you now have a simple choice of what to do located at the top right of the page:


If you are new to the site, you would click the Register link which would take you to the Join! page where you can register and become a member.

When you get to the Join! page you will see that I have added a simple registration/login module to the site. Here is a screen shot of how it looks:


As you can see, if you already have a login at Google, Facebook, Yahoo, AOL, Windows Live or OpenID then you can just use that account to gain access to the site.

Easy! Click one of the buttons and log in as you normally would. A free account will automatically be created for you at TradingStockAlerts.com and you can use the site in its entirety.

The next time you visit TradingStockAlerts.com, click the Sign In link and you'll see something like this:


The login module is able to detect you are returning to the site and suggests you login using the same account.

Note: if you begin to add items to your TradingStockAlerts.com account like email alerts, watchlists or stock screener presets, they are tied to a particular login. It then becomes important that you use that same login each time you return.

In summary, I hope you will give TradingStockAlerts.com another try. When reviewing the web site logs I saw that many of you were kind enough to visit the site once but the majority of readers were, I suspect, put off by the requirement to create a login. Hopefully, this new simplified process will open the door for many of you and encourage you to fully experience the site.

C'mon back and give us another try!



Friday, April 15, 2011

Tyco's are breaking out all over

While the spotlight has been on Tyco International (TYC) and the Wall Street Journal's report of a takeover bid by France's Schneider Electric, a company with a similar name has been quietly working on a reversal.

Formerly known as Tyco Electric, the company now called TE Connectivity (TEL) is in the process of potentially staging a bullish trend reversal.

The stock has closed for two days in a row above the downward-sloping trend line I have drawn in blue on the chart above. Encouragingly, the move has been on increased volume.

What is nice about this stock is that it does not seem to be over-priced so it could have some room to run. Looking at some of the valuation numbers, we see the stock easily has a "reasonable value" profile. Trailing PE of 13 and forward PE of 10. Price-to-sales of 1.26, PEG of 1.04 and ratio of Enterprise Value to EBITDA of only 7.35

In terms of growth, TEL has been doing OK. Year-over-year quarterly revenue increased by 10% and earnings by 54%. Sequential quarterly sales and earnings were up 2% and 4% respectively. Return on equity is over 16%, indicating management is doing a decent job of growing the company.



After the charts and the numbers, it's worth discussing what the company actually does. TE Connectivity, headquartered in Switzerland, manufactures electronic components, network equipment and undersea telecommunication systems. They are a global, $15.7 billion company that designs and manufactures over 500,000 products that connect and protect the flow of power and data. TEL has nearly 100,000 employees and sells into numerous industry verticals from consumer electronics, energy and healthcare, to automotive, aerospace and communication networks. The company pays a 2.1% dividend.

So far, pretty much everything about the company sounds pretty good but there is one issue that needs to be mentioned and that is debt. The company's debt to equity ratio is an excessive 43.85

Summary --

All in all, TEL is a solid company that will benefit from a growing global economy. Not as exciting as Apple, perhaps, but there is nothing wrong with making the low profile components and systems that enable communications, energy exploration, aviation, patient monitoring and a host of other useful industrial and consumer applications. Other than the debt issue, the financials are pretty decent and the technicals are looking promising. In my opinion, TEL deserves a look.

Disclosure: no positions in any of the stocks mentioned in this post



Monday, April 11, 2011

Dodd-Frank as economic stimulus?

Say what you will about the effectiveness of the Dodd-Frank legislation and all the new regulations the law ushers in. One thing is becoming clear: it's going to be a benefit to the IT and consulting industries just as Sarbanes-Oxley was.

According to the magazine Wall Street Technology, capital markets firms are expected to spend some $44 billion on IT in 2011 and a large part of this 6% increase over 2010 is due to Dodd-Frank.

These companies are looking to put systems in place to enforce compliance and implement controls. Even as interpretation of the regulations continues to evolve, the companies know they need to begin ramping up their IT efforts. Furthermore, many companies are more focused on risk management than they ever used to be as a result of having the fear of God, so to speak, instilled in them during the Great Financial Crisis.

So there are some IT professionals who will be hired as a result of this. But the greatest benefit will go to the consulting and audit companies. Accenture (ACN), KPMG, etc. should all do well. Given that the banks, patriotic as they are, have led the charge to outsourcing in India, you can assume that Wipro (WIT) and Infosys (INFY) should see a pick-up in business also.

So the lesson is that every cloud can have a silver lining for someone. And that's despite the howling of the banks and their lobbyists.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.



Saturday, April 9, 2011

How to track the latest earnings updates

Last week I wrote a post introducing my new site TradingStockAlerts.com and described some of the cool things the site's Premium Stock Screener can do.

Today, I'd like to dig into the screener a little further and show how you can keep track of changes in sales and earnings as this upcoming earnings season unfolds.

One of the major advantages of the Premium Stock Screener is that it provides a way to track changes: including but not limited to changes in trend, changes in moving averages and changes in various financial measures.

Take a look at this video and see how easy it is to keep up with changes in earnings on a weekly basis.


If this looks useful to you, please join us at TradingStockAlerts.com





Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.




 
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