Cogent: Lots of Growth in a Slowing Economy
Very few stocks out there can say that they are sporting growth in earnings, sales, and its stock price right now. However, Cogent (COGT) can do that, as this automated fingerprinting identification systems firm to Government, Law Enforcement, and other organizations not only has demand for its products but demand for its stock.
When it comes to the fundamentals, there is definitely a turnaround going on as the most recent EPS for the September 2008 quarter came in with a 180% increase, and on top of that, the sales growth for the same quarter turned around into a 56% increase.
That recent growth, with the 2008 and 2009 earnings estimate growth of 62% and 8% respectively, has helped turn this stock around.
Recent orders for the Cogent BlueCheck mobile ID device from LA county and with the release of the FusionTM Multi-Modal Biometric Handheld device gives this company a leg up on possibly increasing the EPS estimates for 2009.
The turnaround appears so strong for this firm that, even though management owns 57% of the stock outstanding, it is repurchasing $150 million of stock instead of the originally announced $100 million. This along with mutual fund growth of 60 to 63 to 72 the past three quarters proves that the smart money is very interested in accumulating this stock.
It sure is hard to blame them when a company has over $400 million cash on hand, 0% debt to shareholder equity, cash flow of $0.40 a share, a ROE of 6%, and an EPS growth rate of 29%. These fundamentals are strong and only getting stronger.
This can be seen in Investor’s Business Daily via the stock checkup. The EPS rating is 75, the RS rating is 98, the group RS rating is 95, the Acc/Dis rating is an A+, the Composite rating is 98, the timeliness rating is an A, and the earnings stability is 92. These are all very strong ratings and makes it the leader in the Commercial Services-Security/Safety group.
The good news for value investors is that the stock is still not expensive after the rally. Despite the big price gains, the P/E ratio is only 27 which is in the lower end of its 5-year range of 16-100. This stock is definitely not expensive.
However, it is a bit extended from a safe buy point and it would be smarter to let this stock pull back on low volume to either the pivot point (drawn on the chart) or the 50 day moving average (white line around the purple line-200 DMA). If the stock can make it to these support areas it would make for a very nice high reward/low risk long position.
Disclosure: No position in COGT at time of publication.
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