Altera Corporation (NASDAQ: ALTR) makes
high-density programmable logic devices and associated development tools. PLDs are integrated circuits that clients can program themselves, using software that Altera also provides. This allows clients to provide their customers with special-purpose chips that cost less than equivalent custom-designed devices. Altera's circuits are used by thousands of customers in computing, telecommunications, industrial, and automotive applications. Clients include Honeywell (NYSE: HON), Johnson Controls (NYSE: JCI) and Motorola (NYSE: MOT).
Investors were pleased earlier in the week, when Altera reported Q2 EPS of 32 cents, revenues of $359.9 million and a gross margin rate of 67.1%. Analysts had been expecting 27 cents, $346.7 million and 65.01%. The company also guided Q3 revenues to about $349.1-$359.9 million ($350.51M consensus). Management noted a current book-to-bill ratio significantly above one and remarked that the firm had repurchased 526,000 shares so far in Q3. The board declared a five cent quarterly dividend.
The stock
popped into a bullish "flag" consolidation pattern on the news. 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", five "buys" and ten "holds". Analysts see a 17% average annual growth rate, through the next five years. The ALTR PEG ratio (1.29), Price to Free Cash Flow ratio (17.92), EPS Growth rate (45.45%), Operating Margin (23.50%), Net Profit Margin (23.09%), Return on Assets (15.10%), Return on Investment (20.44%), Return on Equity (26.57%) and Revenue per Employee ($113k) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 90% 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 $16.21 and $26.24. A stop-loss of $18.40 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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