Avocent Corporation (NASDAQ: AVCT) makes
connectivity and management products for information technology (IT) infrastructure. Offerings include analog and digital keyboard, video, and mouse switching systems; serial connectivity devices; various extensions; and remote access devices. These allow IT administrators to manage servers, serially controlled devices, wireless devices, desktop computers, and mobile devices from a single console, providing network management and administration. Clients include Dell (NASDAQ: DELL), Hewlett-Packard (NYSE: HPQ) and IBM (NYSE: IBM).
Investors were pleased late last month, when the firm announced that it would cut about 5% of its global workforce, in order to focus on areas of growth. The restructuring will involve the reduction of certain R&D efforts and the transfer of some support operations to a recently established regional hub in Singapore. As a result of the changes, management boosted Q2 revenue guidance from $150-$154 million to $155-$158 million ($152.17M consensus).
AVCT 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.
Brokers recommend the shares with four "strong buys", two "buys" and three "holds". Analysts expect a 19% growth rate, through the next year. The AVCT Price to Sales ratio (1.70), Price to Book ratio (1.35), Price to Free Cash Flow ratio (8.87) and EPS Growth rate (63.16%) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $12.64 and $34.60. A stop-loss of $20.35 looks good here. Note that the firm is expected to release Q2 results on July 17th, after the close.
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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