VeriFone Holdings (PAY): Swipe here

If you are like most of us, you can probably count on one hand the number of times you have paid cash for something recently. Secure electronic payment technology is ubiquitous. The outfit that has installed more such systems than any other company in the world is headquartered in San Jose, California.

VeriFone Holdings (NYSE: PAY) makes and services transaction automation systems that enable electronic payments between consumers, merchants, and financial institutions. Products include point-of-sale software and terminals, smart card/check readers, receipt printers and Internet commerce software. The firm also makes gas station electronic payment systems that combine card processing and fuel dispensing. Further, it offers a range of client services and customized application development. VeriFone was once a division of Hewlett-Packard (NYSE: HPQ).

The company surprised the Street last week, when it reported fiscal Q3 EPS of 42 cents and revenues of $231.9 million. Analysts had been looking for 40 cents and $226.7 million. Management also guided Q4 EPS to 41-42 cents (41 cent consensus), Q4 revenues to $231-$233 million ($235.2M consensus) and FY07 EPS to $1.59-$1.60 ($1.56 consensus). Wedbush Morgan subsequently reiterated its "strong buy" recommendation on the issue. The stock popped above 200-day moving average support on the news and then passed into 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 stock with six "strong buys" and two "holds." Analysts expect a 20% growth rate through the next year. The PAY Sales Growth rate (57.13%) and EPS Growth rate (75%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 82% of the outstanding shares. Over the past 52 weeks, the stock has traded between $27.20 and $42.72. A stop-loss of $34.90 looks good here.

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