Hilary Kramer's Daily Picks & Pans

Thursday, February 1, 2007 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.

What sort of device is the world's single largest consumer of electricity? That's right! It's the electric motor. Who makes it their business to minimize energy waste from motors and all manner of other electrical equipment? Well, one of the big names is in El Segundo, California.

International Rectifier (NYSE:IRF) is a leader in power management technology. Its analog, digital and mixed signal integrated circuits, integrated power systems, and components enable electrical devices to operate more efficiently. The firm's products are used in computers, appliances, lighting systems, automobiles, satellites, aircraft and defense systems. Major customers include Cisco Systems (NASDAQ:CSCO), IBM (NYSE:IBM) and Lockheed Martin (NYSE:LMT).

The company surprised the Street last week, when it reported fiscal Q2 EPS of 58 cents and revenues of $354.7 million. Analysts had been looking for 54 cents and $350.7 million. Management also guided Q3 revenues to $347.6 million ($330M consensus). The CEO attributed success to strong customer demand for flat panel TVs and energy-efficient appliances. He also said he was encouraged by the first wave of new business related to the introduction of Microsoft's (NASDAQ:MSFT) Vista. The news boosted the shares past 50-day, 90-day and 200-day moving average resistance into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with five "strong buys," five "buys" and eight "holds." Analysts see a fifteen percent average annual growth rate, through the next five years. TheIRF P/E ratio (22.32), Price to Sales ratio (2.40), Price to Book ratio (1.73), Price to Cash Flow ratio (14.67) and EPS Growth rate (56.76%) compare favorably with industry, sector and S&P 500 averages.

The stock is one of those used to calculate the S&P 400 MidCap Index. Institutional investors hold about 89 percent of the outstanding shares. Over the past fifty-two weeks, IRF has traded between $31.82 and $48.58. A stop-loss of $36.50 looks good here.

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This entry has 1 comments: (Add your own)

• #1 Comment from enhmd 
  5/16/07 9:14 AM | Permalink

  had it for a long time, and am willing to stick it out
  enhmd