How To Make 79% On Your Next Investment
A couple of months ago I introduced a fantastic little semiconductor equipment stock. You might remember it. The company is Milipitas, California based Nanometrics (NANO).
In the article, The Best Trend In Tech Just Got Better, I told you I expected big things from this company. I also said I could see these shares jumping 46% in the months ahead.
Well, I was wrong…
I should have said this is a phenomenal company and I think it can more than double in value! (I’ll tell you why in a moment.)
First let me refresh your memory…
NANO makes high performance process control metrology systems. Chip makers use these systems in the fabrication of semiconductors, high-brightness LEDs, data storage devices, and solar cells.
I know it sounds complicated, here’s what you really need to know…
Metrology systems are a key part of the chip making process. They improve the performance of chip making equipment. And this helps increase manufacturing yield.
In other words, NANO’s systems help improve product quality, lower manufacturing costs, and increase profitability. These systems are music to a chip maker’s ears.
So, getting back to how I was wrong about NANO…
In my previous article, I told you the company was poised for big growth over the next 12 months. I was expecting revenue to jump 109%. And I was looking for earnings of $1.18 per share.
Fabulous year over year growth any way you slice it.
But here’s the kicker…
It turns out my growth forecast wasn’t nearly robust enough. I under-estimated how strong this company’s revenue and earnings growth truly is.
The truth is, NANO’s metrology systems are selling faster than votes on Capitol Hill!
Remember, chip makers essentially stopped buying chip making equipment in 2008 and 2009. No need to boost capacity as demand for semi-conductors was drying up. Now, with demand for chips skyrocketing, chip makers are scrambling to increase production.
And NANO is raking in the cash hand over fist.
Check out these astonishing second quarter earnings…
Revenue more than tripled year over year to a record $50.8 million. What’s more, revenue jumped a hefty 37% from the first quarter. A great sign sales growth is accelerating.
Earnings were nothing to sneeze at either. Net income rocketed 97% over first quarter levels to $11.6 million. And earnings rose a whopping 82% to $0.51 per share.
But there’s even more…
The company literally blew away analysts’ already formidable estimates. Analysts were looking for revenue of $39.3 million and earnings of $0.27 per share. That’s right, NANO nearly doubled the earnings forecast.
As you might imagine, the stock soared on the news.
You can see from the chart above the stock gapped up huge on August 6th. And the shares continued surging, climbing to a high of $14.18 yesterday.
Congratulations to those of you who bought NANO when I first recommended it. You’ve had an extraordinary opportunity to capture stunning gains of up to 77%… in just two months’ time!
And this is only the beginning…
Analysts have ratcheted revenue and earnings estimates significantly higher. They’re now forecasting 2010 revenue of over $197 million and earnings of $1.97 per share.
Based on these estimates, NANO is still shockingly undervalued… even after the huge jump in price.
At a recent price of $13.84, the shares are trading at just 7.2x the 2010 estimate. With projected five year earnings growth of 20%, the stock’s PEG ratio is a paltry 0.36.
No doubt about it, NANO is poised to rocket higher!
The company’s in hyper-growth mode. The shares deserve a P/E at least equal to the industry average of 13x… if not higher. However, using just the industry average, the shares are worth $24.83.
That’s dynamite upside potential of 79%!
Take a closer look at NANO for your own account. You can buy it here or take your chances of picking up shares on a pullback. Either way, you won’t be sorry.
Category: Stocks
