SeaChange International (NASDAQ: SEAC) supplies digital server systems and software used by television and cable operators to automate the distribution and management of advertising, movies and other programming. Its ITV System allows operators to offer video on demand, pay-per-view, local ad insertions and other interactive services to subscribers, while its VODlink set-top box middleware allows cable subscribers to access a variety of interactive features. Customers include Comcast (NASDAQ: CMCSA), Verizon Communications (NYSE: VZ) and Walt Disney (NYSE: DIS).

The company surprised the Street last week, when it reported Q1 EPS of a penny and revenues of $45.3 million. Analysts had been looking for a loss of one cent and $43.6 million. The CEO noted that North American service provider spending for the firm's products continued to be strong, driving gross margins to 50% for the quarter. Management also guided FY09 revenues to about $197.9 million ($195.21M consensus) and said the company will be profitable in Q2 and FY09.

The SEAC price popped on the news and then moved into a bullish "pennant" 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 shares with four "strong buys," one "buy" and one "hold." Analysts see a 58% growth rate, through the next year. The SEAC Price to Book ratio (1.43), Price to Free Cash Flow ratio (23.88), Sales Growth rate (16.63% y/y) and EPS Growth rate (-0.12 to +0.01 y/y) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 75% of the outstanding shares. Over the past 52 weeks, the stock has traded between $4.95 and $9.23. A stop-loss of $6.90 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.