Lawson Software: Technicals suggest upside potential

Successful companies are constantly engaged in the struggle to streamline processes, reduce costs and enhance operational performances. There is an outfit in St. Paul, Minnesota that has been helping firms over those hurdles for more than thirty years. Its programs are used at some 4,000 customer sites, in forty countries.

Lawson Software (NASDAQ: LWSN) offers enterprise enhancement program systems to customers in the manufacturing, distribution, maintenance and service industries. The firm's software products include performance management, supply chain management, resource planning, customer relationship management, manufacturing resource planning, asset management, human resources, accounting and industry-tailored applications. The company also provides consulting, training and implementation services. Lawson has business partnerships with the likes of Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Microsoft (NASDAQ: MSFT), Office Depot (NYSE: ODP) and Sun Microsystems (NASDAQ: SUNW).

The stock popped into a bullish "flag" pattern last week, when the firm preannounced better than expected Q3 EPS and revenue results. The next day, Deutsche Securities and Dougherty reiterated "buy" recommendations and boosted their price targets to the $10-11 range. Then, this Monday evening, the company officially released its Q3 numbers and they topped raised Street consensus figures.

The share price closed within the flag on Tuesday, but has become volatile, suggesting the potential for an exit before long. Stocks frequently leave flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers now recommend the issue with five "strong buys", three "buys" and two "holds". Analysts see a 154 percent growth rate, through the next year. The LWSN Price to Sales ratio (2.99), Price to Book ratio (2.09) and Sales Growth rate (118.02%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 63% of the outstanding shares. Over the past 52 weeks, the stock has traded between $5.39 and $9.27. A stop-loss of $7.80 looks good here.

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