Amdocs Limited (NYSE: DOX) provides
customer relationship management, sales and billing software used primarily by telecommunications service firms. It also sells publishing software for generating print and online directories and offers a variety of outsourced communications facility management services. Clients include AT&T (NYSE: T), Sprint Nextel (NYSE: S) and Verizon Communications (NYSE: VZ).
Investors were pleased last week, when Amdocs reported Q2 EPS of 58 cents and revenues of $774.3 million. The Street had been looking for 57 cents and $761.7 million. The CEO noted particular strength in the managed services businesses. The firm also guided Q3 EPS to 59-61 cents (59 cent consensus), Q3 revenues to $790-$805 million ($784.36M consensus), FY08 EPS to $2.31-$2.37 ($2.35 consensus) and FY08 revenues to $3.09-$3.15 billion ($3.1B consensus). Wedbush Morgan subsequently reiterated its "strong buy" rating on the issue (tgt = $42) and Cantor Fitzgerald reiterated its "buy" (tgt = $45)
DOX 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.
Brokers recommend the issue with seven "strong buys", ten "buys" and five "holds". The DOX P/E ratio (17.78), Price to Sales ratio (2.16), Price to Book ratio (2.34) and Price to Cash Flow ratio (11.89) 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 $27.18 and $40.36. A stop-loss of $26.75 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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Reader Comments (Page 1 of 1)
5-02-2008 @ 5:48AM
Matt said...
A stoploss at $30.25 looks better to me. It depends on whether you are a trader or investor and willing to hold onto adverse price changes.
Since you are pointing out a bull flag you want to make sure this trade also works out as anticipated. So dropping below $30.25 makes this bull flag a failure.