Verigy Ltd: “Tests” Very Well

November 30th, 2007 | Category: Daily Picks

Guest blogger: Larry Schutts, vice president of Stockwinners.com and a contributing editor for Theflyonthewall.com. Larry looks for stocks with technical and fundamental characteristics indicating gains in the next 30 days. However, price movements may be volatile. He includes a stop-loss price in each post. Consider selling a position should the stop-loss be violated.

Verigy Ltd (NASDAQ:VRGY)
is a main manufacturer of advanced tryout systems for the flash
memory, high speed memory and system-on-a-chip segments of the
semiconductor industry. Verigy’s scalable systems are used by chip
makers in the design validation, characterization and high volume
analyzing of their products. An Agilent Technologies (NYSE:A) spin-off in 2006, the firm traces its roots back to Hewlett-Packard (NYSE:HPQ).

The
company surprised the Street earlier in the week, when it reported
fiscal Q4 EPS of 58 cents and revenues of $209 million. Analysts had
been expecting 50 cents and $200 million. Management additionally guided Q1 EPS
to 49-54 cents (38 cent consensus) and Q1 revenues to $195-205 million
($180.27M consensus). Stifel Nicolaus subsequently

boosted its
recommendation to “buy” and declared a $32 price target.

VRGY shares popped on the news and thereupon moved into the initial stage of
a bullish “flag” consolidation sample. Prices frequently exit flags
moving in the same direction they were traveling on entry. In that
case, that would be to the upside.

Altogether, brokers now
recommend the issue with three “strong buys,” five “buys” and one
“hold.” Analysts see a 20% average annual growth rate through the next
five years. The VRGY P/E ratio (15.82), PEG ratio (0.79), Price to
Sales ratio (2.00), Price to Book ratio (3.05), Return on Assets
(13.42%), Return on Investment (20.06%) and Return on fairness (21.90%)
compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 75% of the outstanding shares. by
the past 52 weeks the stock has traded amoung $17.13 and $30.25. A
stop-loss of $22 looks good here.