Kendle International (KNDL): Price cycles in bullish 'flag' formation

Posted Aug 20th 2008 11:34AM by Larry Schutts
Filed under: Earnings Reports, Analyst Upgrades and Downgrades, Technical Analysis, Stocks to Buy

Kendle International (NASDAQ: KNDL) provides a range of clinical development services to the biopharmaceutical industry. Offerings include clinical trial management, clinical data management, statistical analysis, medical writing, regulatory consulting and publication services. The company has expertise in a range of therapeutic areas, including oncology, cardiovascular disease, inflammation and central nervous system disorders. Kendle's Early Stage segment focuses on Phase I operations. The Late Stage unit handles Phase II through IV clinical trials, regulatory affairs, and biometrics offerings. Covance (NYSE: CVD) and Parexel International (NASDAQ: PRXL) are major competitors.

The firm surprised the Street earlier in the month, when it reported Q2 EPS of 52 cents and revenues of $127 million. Analysts had been looking for 46 cents and $115.3 million. The EPS figure was a company record. Management also guided FY08 EPS to $2.00-$2.15 ($1.90 consensus) and FY08 revenues to $490-$500 million ($468.76M consensus). Ladenburg Thalmann subsequently reiterated its "buy" recommendation and boosted its price target to $51.

The KNDL price popped on the earnings news and then moved into 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.

Brokers recommend the issue with four "strong buys", three "buys", one "hold" and one "underperform". Analysts see a 25% average annual growth rate, through the next five years. The KNDL Price to Sales ratio (1.10), Sales Growth rate (29.85%) and EPS Growth rate (52.94%) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $35.35 and $51.60. A stop-loss of $39.90 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.

Tags: flag, fundamental analysis, FundamentalAnalysis, Kendle International, KendleInternational, KNDL, momentum, technical analysis, TechnicalAnalysis