03 December 05:11 AM
The analysis of the fundamental values and investors’ sentiments is made within the scope of sorting out the stocks for the Sep 21st 2010 buy-list.
About the company.
Newport corp. is a provider of hi-tech products for a range of industries and sectors, including science (scientific research), microelectronics, aerospace and defense industries etc.
Investment idea.
The company has fairly strong fundamental values. The company’s income and sales volumes show constant growth. Analysts feel optimistic about it. The data usually come out better then the forecasts. Probably the company is underestimated and has potential to grow.
As for the corporate (non-systemic) risks, they are minimal as the fundamental conditions are strong. The main risks are systemic – the deterioration of the economic situation in the US.
Potential trading plan.
In order to enter the market in an aggressive way we recommend waiting for the signs of the uptrend continuation by defining them with the help of the stock market indicators. Meanwhile we advise you to enter at $14 - $13,5. We think that the probability of falling below the 13,5$-13$ price range is very unlikely (minimal) while the upward objective is located around $18.
As a risky scenario, we consider either a systemic decline or sharp worsening of the company’s fundamental values.
The analytic stop-loss is recommended to be placed after the price settles below $13.
The EV of the deal is positive: the target potential (distance to the target) is 28% while the stop-loss risk is 7%. Profit/loss= 4.
Fundamental growth analysis
Last quarter the company showed a 450% increase as compared to the same quarter of the previous year. In the 2nd quarter the increase was 264%. The given dynamics is explained by the fact that the company was seriously affected by the recession. Since the 3rd quarter of 2009 the income has been recovering rapidly. In general over 2010 we expect the company to get a 410% increase in its income.
The sales are growing, which confirms the recovery of the company’s income.
From 2005 till 2008 the increase in the average annual income declined from $0.91 down to -$0,04 per share. In 2009 the company’s income started showing signs of recovery.
This year we expect record-breaking values over the last 5 years at the level of $1.02 per share.
According to our forecasts, the company’s income is believed to continue its heavy growth within the next few years.
The sales within the period of 2006-2009 were declining. So we expect that in 2010 there will be a considerable sales increase. It is estimated to reach 28% of the value of the previous year.
Market sentiment analysis
Over the last month the forecast improved from $0.9 up to $1.02 per share. The prices reacted with an increase. Currently the market is seeing a retracement to the growth.
The company’s fundamental data are constantly improving while analysts feel optimistic about it.
Over the last few years the reported data have been coming out better than expected. So it is highly probable that the company is underestimated. Yet there is no potential for reconsidering it in the near future.
Long term sentiment analysis
The current target price investors are oriented to is $18,5. Over the last 5 months the target has seen several increases.
83% of analysts believe in the further growth of the company’s shares.
We expect the target price to stay around $18 (28% growth potential) until the end of 2010.
The average estimated target is $18, which is 1.03% lower than investors’ average sentiments.
Provided by the Sub-Department of Portfolio Management of the Investment Department
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