JDA Software: Up nearly 30% YTD but more upside seen

The successful management of business supply and demand processes is an art, requiring discipline and attention to many details. There's a firm in Scottsdale, Arizona that many turn to for help along that line.

JDA Software Group, Inc. (NASDAQ: JDAS) provides programs that helps retailers, manufacturers and distributors manage their supply and demand chains, plan operations and manage revenues. It also offers point-of-sale applications to handle an array of back-office functions. The company helps some 5,500 customers in more than 60 countries. Clients include Colgate-Palmolive (NYSE: CL), OfficeMax (NYSE: OMX) and Wal-Mart (NYSE: WMT). Microsoft (NASDAQ: MSFT) is a leading strategic partner. Oracle (NASDAQ: ORCL) and SAP (NYSE: SAP) are major competitors.

The firm surprised the Street earlier in the week, when it issued upside guidance for Q1 results. Management now sees EPS of 26-28 cents (21 cent consensus) and revenues of $89.7-90.7 million ($85.83M consensus). The CEO attributed the positive outlook to organizational changes put into place last year and to the impact of the company's acquisition of Manugistics (7/5/06). CIBC World Markets and Brean Murray subsequently reiterated "buy" recommendations on the issue and boosted their price targets to $20.

JDAS shares popped into the initial stage of a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants 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 stock with one "strong buy", two "buys" and five "holds". Analysts see a 15% average annual growth rate, through the next five years. The JDAS Price to Sales ratio (1.83), Price to Book ratio (1.74), Sales Growth rate (60.80%) and EPS Growth rate (33.33%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 95% 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 $12.46 and $18.20. A stop-loss of $15.30 looks good here. Note that the firm is expected to announce first quarter results on April 23rd, after the close.

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