Brooks Automation makes the machines that make your chips

As they say in manufacturing circles, it takes good hardware to make good hardware. A leader in the art of fashioning the automated systems used to make quality semiconductors is headquartered in Chelmsford, Massachusetts.

Brooks Automation (NASDAQ:BRKS) supplies a range of technology products to the semiconductor market. The Hardware segment provides the vacuum systems, factory automation devices, wafer handling systems and thermal conditioning modules necessary to efficient chip manufacturing. It also sells specialty equipment to makers of flat-panel displays and data storage devices. The Software segment provides programs that manage the manufacturing process.

The firm surprised investors last week, when it reported fiscal Q1 EPS of 35 cents and revenues of $191.4 million. Analysts had been looking for 28 cents and $187.3 million. Management also guided Q2 EPS to 30-35 cents (24 cent consensus) and Q2 revenues to $185-$190 million ($180.35M consensus). The CEO noted strong demand for new generation atmospheric and vacuum automation products, which provide an improved cost structure for Brooks. He also remarked that the firm's global customer support business continues to generate future growth, as it leverages new product offerings on the large installed base of core automation modules. The news boosted the share price out of a late January "cup" into the early February "handle" of a bullish Cup & Handle formation. The price is showing signs of completing the pattern by rising from the right-hand side of the "handle."

Brokers recommend the issue with four "buys," seven "holds" and one "sell." The BRKS P/E ratio (21.43), Price to Sales ratio (1.56), Price to Book ratio (1.43), Price to Cash Flow ratio (13.76), Sales Growth rate (76.41%) and EPS Growth rate (0.00 to 0.35 yr/yr) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 94% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $10.56 and $16.74. A stop-loss of $13.40 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.