Altera Corporation (ALTR): Programmable logic solutions

When you make a product that people need and allow them to save money by fine-tuning its properties to suit themselves, your business is liable to do well. That's the way it has gone for the inventor of the user-programmable integrated circuit.

Altera Corporation (NASDAQ: ALTR) sells high-density programmable logic devices and associated development tools. PLDs are integrated circuits that clients can program themselves. This allows them to provide their customers with special-purpose chips that cost less than equivalent custom-designed devices. Altera's circuits reach end users in a wide variety of computing, telecommunications, industrial and automotive products. Clients include Alcatel-Lucent (NYSE: ALU), Honeywell (NYSE: HON), Johnson Controls (NYSE: JCI), Motorola (NYSE: MOT), Nortel Networks (NYSE: NT) and Texas Instruments (NYSE: TXN). For the second year in a row, Altera has been named to the Business Week Hot 100.

The company pleased investors late last month, when it announced Q2 EPS of 22 cents and revenues of $319.7 million. Analysts had been looking for 19 cents and $313.2 million. Management also guided Q3 revenues to $320-329 million ($322.60M consensus).

The news kept ALTR shares cycling through a positive four month trading channel. The price is currently consolidating near the base of that channel, where oversold Stochastic and MACD technical parameters suggest the potential for a rise back toward the top. Correspondence of the stock's 90-day moving average to the base of the channel backs the rebound notion.

Brokers recommend the issue with four "strong buys", four "buys" and eighteen "holds". Analysts see a 32% growth rate, through the next year. The ALTR PEG ratio (1.28), Operating Margin (24.17%), Net Profit Margin (26.72%), Return on Assets (16.37%), Return on Investment (22.63%), Return on Equity (23.89%) and Revenue per Employee ($129k) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $17.51 and $26.24. A stop-loss of $19.70 looks good here.

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