Xyratex, Ltd.
(XRTX) creates technologies that enable storage and data communication
networks.
Key
Information:
Fundamental:
Sector:
Technology
Industry:
Data Storage Devices
Liquidity:
Market
Capitalization: $771.85 Million
Average daily
volume (3-month): 390 Thousand Shares
Closing Stock
Price: $27.00
Risk
Proxies:
52-week high /
52-week low: 2.18
Beta
(3-month): 3.76
Debt/Equity:
0.09
Profitable:
Yes
Note:
The stock has a high beta, and is quite volatile. If you decide to trade
this stock, please use appropriate position sizing.
Valuation:
Price/Sales:
1.09
Price/Book:
4.57
Price/Earnings:
18.58
Price/2006
Analyst Earnings Estimates: 12.98
Fundamental
Analysis
Overview
Based on our
analysis of recent growth, growth projections, stock ownership, and valuations,
we believe Xyratex, Ltd. to be undervalued.
Recent
Growth
Revenues for
Q4 2005 came in 24% above revenues for Q3, and 74% above revenues for Q4 of
2004. EPS for Q4 2005 was $0.47, up from $0.27 in Q3.
The strong
revenue and EPS growth is a substantially positive signal for the stock.
Institutional
Transactions
Recent
institutional transactions have been net positive. 2.9 million shares
were recently bought by institutions; 1.5 million shares were sold.
Analyst
Forecasts
Analysts
forecast 2006 EPS of $1.87, and 2007 EPS of $2.10. The spread of these
estimates are $0.26 and $0.43, respectively. Forecasts are for 15.5%
annual EPS growth over the next five years.
During the
past three months, analysts have increased their estimates for this quarter,
this FY, and the next FY.
- This quarter: From $0.15 to $0.25
- This fiscal year: From $1.75 to $1.87
- Next fiscal year: From $1.84 to $2.10
During the
MRQ, EPS came in at $0.54, $0.04 above consensus estimates.
Three analysts
rate the stock as a Strong Buy, and three rate it as a Buy.
We view the
strong long-term growth estimates, increasing estimates, and positive ratings
as bullish indicators for the stock.
Comparative
Valuations
In
consideration of Xyratex's excellent performance, we believe it is valued
cheaply in comparison to the average stock in the industry. This year the
company grew revenues by 74.4%; the average company in the industry grew
revenues by only 19.4%. Despite this, the trailing P/E ratio of XRTX is
18.58, only slightly higher than the industry average of 17.00.
Valuations
We believe XRTX's forward P/EG ratio of 0.83 is too low. We
believe a fair valuation would leave the P/EG ratio closer to 1.0.
Technical
Analysis
XRTX is in a
strong uptrend, and is making new highs. From a technical analysis
perspective, we are slightly bullish on the stock.
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Key
Levels
Buy:
Market
We are
fundamentally bullish
Stop
Loss: 22.24
Slightly below
the recent lows
Target:
a forward P/EG ratio of 1
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