Hewitt Associates (HEW): Shares forming a bullish 'flag'

The firm surprised the Street last week, when it reported Q4 EPS of 60 cents and revenues of $768.2 million. Analysts had been expecting 37 cents and $747 million. Management also guided FY08 EPS to $1.70-$1.80 ($1.64 consensus). RBC Capital Markets subsequently reiterated its "outperform" rating on the shares. The HEW price popped through 30-day and 50-day moving average resistance on the news and has since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers recommend the issue with three "strong buys", two "buys", six "holds" and two "sells". Analysts expect a 47% growth rate, through the next year. The HEW Price to Sales ratio (1.33), Price to Book ratio (3.82), Price to Free Cash Flow ratio (11.45) and EPS Growth rate (185.71%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 83% of the outstanding shares. Over the past 52 weeks, the stock has traded between $23.54 and $37.79. A stop-loss of $31.95 looks good here.

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