Xyratex Ltd.
(
XRTX
) has seen some good earnings surprises and fights off the pressure
of the Thailand floods. The stock is a Zacks #1 Rank (Strong Buy).
Company Description
Xyratex provides modular enterprise-class data storage subsystems
and hard disk drive capital equipment for original equipment
manufacturers (OEM), and hard disk drive manufacturers and their
component suppliers in North America, Asia, and Europe. It operates
in two segments, Networked Storage Solutions and Storage
Infrastructure.
Earnings Estimates Increase
Earnings estimates for 2012 have moved around quite a bit over the
last year. In August of 2011, analysts weren't as positive on XRTX
as the Zacks Consensus Estimate moved as low as $0.75. Since that
time, there have been some revisions and the outlook has improved.
The current Zacks Consensus Estimate is calling for EPS of $1.46
for 2012.
The Zacks Consensus Estimate for 2013 has seen some similar moves.
In September of 2011, the outlook wasn't as positive, and analysts
were expecting earnings of $1.02. The recent increase in
expectations translated to a new Zacks Consensus Estimate of $1.39.
Flooding in Thailand
Earlier floods in Thailand have wreaked havoc on the hard disk
drive industry. XRTX was not immune to this idea as many analysts
took down estimates and expectations as the supply chain was
compromised.
Two Big Earnings Surprises
The last two earnings reports are the kind that aggressive growth
investors like to see. The August 2011 quarter saw EPS come in 100%
ahead of estimates. The company reported earnings of $0.32 or a
full $0.16 ahead of the $0.16 Zacks Consensus Estimate. The
November quarter, reported in the beginning of January of 2012, saw
a bigger beat. In reporting $0.70 per share of earnings, the
company beat expectations by 133% coming in $0.40 ahead of the
$0.30 expectation. The caveats on these massive beats are that
there are only three analysts covering the stock and the company
missed in expectations in the May 2011 quarter.
Valuations
Aggressive growth investors might be confused for value investors
when looking at the valuations metrics for XRTX. The company trades
at a discount to the industry for both trailing and forward PE. At
15x, the PE is just below the industry average of 17x trailing
earnings. What really stands out is the price to book and price to
sales. The 1.2x price to book is well below the industry average of
4x and the 0.3x price to sales is also well below the 2x industry
average for the metric. Both of those metrics could make possible
suitors interested in at least kicking the tires for a potential
acquisition.
The Chart
The recent price action shows some dramatic growth over the last
few months, as concerns over the floods abated and earnings
expectations increased. Growth in sales and M&A speculation may
take this stock even higher in the future.
Brian Bolan is an Aggressive Growth Stock Strategist for
Zacks.com.
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XYRATEX LTD (
XRTX
): Free Stock Analysis Report
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