RadiSys Corporation (NASDAQ: RSYS) makes system products for embedded computer applications used in the manufacturing automation, medical, transportation, telecommunications, gaming and test equipment markets. Products include embedded boards, board-level modules and chip-level components. The company also offers system integration and repair services. Clients include Nokia (NYSE: NOK), Nortel Networks (NYSE: NT) and IBM (NYSE: IBM).
The firm pleased investors earlier in the month, when it announced Q3 EPS of 11 cents and revenues of $83.6 million. Analysts
had been expecting a penny and $77.1 million. Management also guided Q4 EPS to 11-15 cents (5 cent consensus) and Q4 revenues to $92-$98 million ($83.56M consensus). The CEO was particularly pleased with the prospect of recent acquisitions going cash flow positive in the fourth quarter. Jefferies, Cantor Fitzgerald and Needham subsequently declared the stock a "buy." RSYS shares popped on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with one "strong buy," three "buys" and one "hold." Analysts see a 15% average annual growth rate, through the next five years. The RSYS Price to Sales ratio (1.17) and Price to Book ratio (1.54) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 93% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $10.50 and $17.60. A stop-loss of $13.85 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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