National Semiconductor: Integrating circuits from the beginning

The firm pleased investors earlier in the month, when it reported Q4 EPS of 28 cents and revenues of $455.9 million. Analysts had been looking for 23 cents and $450.6 million. Sales of chips for cell phones provided National with its biggest boost during the quarter, surging 16 percent sequentially. Management also guided Q1 revenues to $460.5-$474.1 million ($460.98M consensus). The board authorized a fresh $2 billion buyback program. That added to about $380 million remaining under previous authorizations. NSM shares powered through 30-day moving average resistance on the news and began defining a bullish "pennant" consolidation pattern. 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.

Brokers recommend the issue with four "strong buys", six "buys", and fourteen "holds". Analysts expect a 15 percent average annual growth rate, through the next five years. The NSM Price to Free Cash flow ratio (19.22), Operating Margin (25.37%), Net Profit Margin (19.45%), Return on Assets (15.93%), Return on Investment (18.70%) and Return on Equity (20.43%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 88 percent of the outstanding shares. The stock is one of those used to calculate the S&P 100 and S&P 500 Indexes. Over the past 52 weeks, it has traded between $20.56 and $29.69. A stop-loss of $24.60 looks good here.

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