One of the top priorities of any manufacturer is efficient management of the variable demands made on its supply chain. There is an outfit in Dallas that has been helping some of the biggest firms in the world streamline the process for nearly twenty years.
i2 Technologies (NASDAQ: ITWO) provides supply chain management software that helps manufacturers boost operating efficiency, work with customers and suppliers, and administer electronic marketplaces. The firm also offers consulting, maintenance and training services. Clients include such manufacturing leaders as 3M (NYSE: MMM), General Electric (NYSE: GE) and Honeywell International (NYSE: HON).
The company pleased investors earlier in the month, when it reported Q3 EPS of 24 cents and revenues of $66.5 million. Analysts had been expecting 12 cents and $63.7 million. In discussing the results, the CEO cited continued momentum in the services business and significant customer wins for the firm's retail and logistics solutions. Management also guided FY07 EPS to 82-92 cents (80 cent consensus) and FY07 revenues to $263.5-266.5 million ($261.87M consensus). JMP Securities subsequently reiterated its "market outperform" rating on the shares and boosted its price target to $22.
The news kept ITWO shares cycling through a positive ten-week trading channel. The price is currently consolidating at 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 30-day moving average to the base of the channel backs the rebound notion.
Brokers recommend the issue with one "strong buy", two "buys", one "hold" and a "sell". Analysts see a 14% growth rate, through the next year. The stock's P/E ratio (19.52), Price to Sales ratio (1.37), Price to Cash Flow ratio (12.21), EPS Growth rate (60.00%), Return on Assets (13.20%) and Return on Investment (41.25%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 81% of the outstanding shares. Over the past 52 weeks, the stock has traded between $13.25 and $27.46. A stop-loss of $15.00 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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