Sykes Enterprises (SYKE): Share price cycling in bullish 'flag'

Posted May 12th 2008 12:36PM by Larry Schutts
Filed under: Earnings Reports, Analyst Upgrades and Downgrades, Technical Analysis, Stocks to Buy

Sykes Enterprises (NASDAQ: SYKE) provides outsourced customer contact management services to the business community. It offers technical support and customer service via telephone, e-mail and chat, through centers in the Americas, Europe, Asia and Africa. Sykes also provides large corporations with technical staffing and customer relationship management consulting services. Clients are primarily firms in the communications, technology, financial services, healthcare and transportation industries.

The company pleased investors last week, when it announced Q1 EPS of 38 cents and revenues of $203.7 million. Analysts had been looking 26 cents and $201.6 million. Management also guided Q2 EPS to 29-31 cents (27 cent consensus), Q2 revenues to $205-$210 million ($200.34M consensus), FY08 EPS to $1.24-$1.33 ($1.15 consensus) and FY08 revenues to $815-$830 million ($815.04M consensus). Susquehanna Financial subsequently reiterated its "positive" rating on the shares.

The stock popped above 30-day moving average support 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 now recommend the issue with four "strong buys", two "buys" and three "holds". Analysts see a 19% average annual growth rate, through the next five years. The SYKE Price to Sales ratio (1.17), Price to Book ratio (2.26), Price to Cash Flow ratio (12.79), Sales Growth rate (21.25%) and EPS Growth rate (31.03%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 84% 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 $14.96 and $20.85. A stop-loss of $17.00 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.

Tags: flag, fundamental analysis, FundamentalAnalysis, momentum, SYKE, Sykes Enterprises, SykesEnterprises, technical analysis, TechnicalAnalysis