BMC Software (NYSE: BMC) provides
software used by large enterprises to manage computer systems and company services. Among the functions addressed are business process scheduling and integration, application and database performance, and recovery and storage management. Customers include Dell (NASDAQ: DELL), Home Depot (NYSE: HD) and Toyota Motor (NYSE: TM).
The company surprised investors last week, when it reported fiscal Q4 EPS of 63 cents and revenues of $466.9 million. Analysts had been looking for 51 cents and $460.3 million. In discussing the successful quarter, the CEO noted client interest in the unified architecture of the firm's suite. Management also guided FY09 EPS to $2.10-$2.20, versus consensus of $2.09. Oppenheimer and Lehman Brothers subsequently reiterated "buy" recommendations on the issue and boosted their price targets to $43.
BMC shares
popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend BMC with two "strong buys", four "buys", four "holds" and one "underperform". Analysts see a 16% growth rate, through the next year. The stock's Price to Free Cash Flow ratio (19.66), EPS Growth rate (65.09%) and Return on Equity (30.69%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $24.77 and $39.37. A stop-loss of $32.90 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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