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Will This Eagle Soar?
The Hot IPO Trader
Thursday, March 2, 2006
By Louis Basenese
#31
** Will This Eagle Soar?
The few deals slated for this week have been scrapped (or postponed indefinitely). Accordingly, I’ve moved onto next week. And my research has unearthed a company with the potential to soar: Eagle Test Systems, Inc. (Nasdaq: EGLT).
Here’s what I like about the company so far…
As a designer and manufacturer of high-performance test equipment, Eagle’s products solve a huge problem for the semiconductor industry – lowering the cost of testing.
Eagle accomplishes this feat largely by reducing the overall test time and thus increasing the amount of semiconductors that can be tested in any given time period. And we’re not just talking incremental reductions in test time.
In recent case studies, Eagle’s products have enabled various companies to slash their test time by as much as 93 %. Amazing as that may be, there’s plenty else to like about Eagle.
Founded in 1976, Eagle has a proven track record of growth, profitability and industry leading margins. In fact, over the last five years, Eagle’s gross and operating margins were better than all public competitors by as much as 20%.
Other items worth mentioning include the company’s rapidly expanding blue-chip client list, a proven management team and strong financials (which include no debt and a healthy cash position).
Of course, as is the case for most IPOs, demand for shares boils down to the company’s overall growth opportunities. And for Eagle, there are plenty.
A new headquarters is boosting capacity and enabling Eagle to aggressively pursue growth in key emerging markets (particularly in the Far East). The flexible and scalable nature of its products (along with the low switching costs involved) are similarly opening up significant market share possibilities.
And lastly, Eagle’s focus on companies in high-growth semiconductor markets (digital cameras, MP3 players, automotive electronics and computer peripherals) ensures double-digit revenue growth well into the future. Eagle’s already accomplished this feat for the past five years, and based on the fundamentals, there’s no reason to believe the company cannot do the same for at least the next five years.
I’ll continue gathering info and making calls to determine how hot institutional demand is for this offering. And I’ll also keep you abreast of any other appealing IPOs coming to market next week.
Until then, just be prepared to act. Eagle is expected to price on Wednesday, March 8, between $14 and $16. And trading should begin on Thursday. But as we know from past experience, these details can change quickly.
Either way, I’ll keep you posted and will issue a final recommendation when the terms are set.
Elsewhere, we stopped out of our remaining shares of Basic Energy Services (NYSE: BAS). Take profits if you haven’t done so already.
I’ll be in touch shortly.
Until then…
Louis Basenese
Stock
Current Price
Comments
Morton’s (NYSE: MRT)
$17.11
Buy. Move sell stop up to $16.50.
Chipotle (NYSE: CMG)
$45.50
Buy. Move sell stop up to $40.
Linn Energy (Nasdaq: LINE)
$20.91
Hold. Sell stop is $19.
Basic Energy Services (NYSE: BAS)
Take profits!
Stock hit trailing stop.
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