ScanSource (NASDAQ: SCSC) is
a distributor of specialty technical products for automatic identification/data capture, point of sale and communications applications. It provides such devices as bar code scanners, receipt/label printers, PC-based terminals, pole displays, call center equipment and electronic security products. The firm sells equipment from such manufacturers as Cisco Systems (NASDAQ: CSCO), IBM (NYSE: IBM) and Microsoft (NASDAQ: MSFT).
ScanSource pleased investors last week, when it reported fiscal Q2 EPS of 60 cents and revenues of $553.3 million. Analysts had been looking for 48 cents and $553.9 million. The CEO noted that growth was led by record results in the North American and International point of sale/bar code units. Management also guided Q3 revenues to $550-$570 million, versus the $549.94 million consensus estimate.
SCSC shares
popped on the news and have since been defining a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy", one "buy", two "holds" and one "sell". Analysts see a 17% average annual growth rate, through the next five years. The SCSC P/E ratio (15.91), PEG ratio (0.93), Price to Sales ratio (0.38), Price to Book ratio (2.24) and Revenue per Employee ($2.14M) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95% 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 $22.61 and $39.50. A stop-loss of $27.25 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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