Skip to main content

Intevac -- breakout in progress, more room to run?

One of the stocks that popped up on Alert HQ earlier this week is a tech stock that looks a lot like a value stock. I'm talking about Intevac (IVAC).

Intevac is a small cap stock that has broken out in a big way. It's up over 50% from its most recent low in mid-September. The question is, however, is it now over-priced?

First, let's take a look at the weekly chart:


You can see that it's gone from around $9 to almost $15 which is a sizable move. A pull-back seems almost inevitable. Yet, after that potential pull-back runs its course, there could be room for further gains. Here's why:

The basic scenario is that this stock currently looks like a value stock. If it is perceived to be a growth stock, then there is opportunity for its multiple to increase.

Let's take a look at the financials and establish its value qualifications. Here are some valuation characteristics:
  • Trailing PE is 11.48, which is quite reasonable for a tech stock. Forward PE is 17.61 which is not excessive.
  • PEG is only 0.9 which is in a range considered to be good value
  • Price to Sales and Price to Book are both about 1.6, again good value
  • Enterprise Value/EBITDA is less than  6 which is definitely value territory
  • Ratio of  Enterprise Value to Free Cash flow is 8 which is in the value sweet spot
  • The company has virtually no debt
So the company is still quite reasonably priced thus far. Is there a growth pattern appearing that will allow the stock price to continue it's climb? Here is the chart from Google Finance:

There has been a big jump in both revenue and earnings from Q2 to Q3 but a slowdown in growth from Q3 to Q4. If the company can just resume modest growth from current levels, there should be room for stock price appreciation. What factors might provide investors some confidence that this might actually happen?

Management effectiveness seems to be pretty good. Return on Assets and Return on Equity are both in double digits which suggests that management is providing good returns for shareholders.

What about the company's product mix and industry outlook? Intevac is a major player in the manufacturing of magnetic media for disk drives. Over 60% of the world’s hard disk output is produced on Intevac systems. The companies solar processing segment is involved in providing manufacturing and inspection platforms for thin film solar cells. The photonics segment is involved in sensors, specialized cameras, night vision, material identification (including biologic and explosives detection).

The good news is that in the age of pervasive computing, PCs are not the only products that use disk drives. Everything from iPods to massive enterprise data center disk storage systems need magnetic media. As the volume of data continues to grow nearly exponentially, in the cloud, in the data center and in your hand-held devices, it would seem that Intevac is in a good position as the major supplier of disk manufacturing systems.

Similarly, sensors of all kinds are proliferating so the company's photonics segments has a shot at doing well in the niches servicing the law enforcement, pharmaceutical, industrial inspection and laboratory markets.

Thin film solar cells are considered to be the latest, leading edge technology in the photovoltaic industry. It is promising that Intevac is involved in thin film manufacturing and inspection systems at this point in time and that perhaps the company can leverage this into a leading position.

All in all, the company is priced reasonably and still has the potential to follow through on its recent breakout. It's worth it for investors to keep an eye on Intevac and be ready jump in if the company begins another leg up.

Disclosure: no positions at time of writing

Comments

Popular posts from this blog

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…