Hilary Kramer's Daily Picks & Pans

Friday, June 29, 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.

When you want to check the efficiency of a process, you monitor its performance at various points along the way. There is an outfit in Westford, Massachusetts that successfully applies that principle to computer networks.

NetScout Systems (NASDAQ:NTCT) provides a family of integrated software and hardware products that enable an enterprise to monitor the performance of its computer network. Administrators place NetScout monitoring appliances throughout the network and then use associated software to collect information about traffic flow to optimize efficiency. The products ensure that critical business applications such as e-mail, Voice over IP, supply chain management and customer resource management run effectively and reliably. The firm works with such strategic partners as AT&T (NYSE:T). US Airways Group (NYSE:LCC) is a major customer.

The company pleased investors early in the week, when it raised its Q1 EPS guidance to 6-8 cents and its revenue guidance to $27-$28 million. Analysts had been looking for 6 cents and $26.21 million. The CEO cited unexpected strength in bookings, which followed product improvements. The share price popped through 90-day moving average resistance on the news and subsequently began consolidating the gain in a bullish "flag" pattern. Prices 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 two "strong buys" and one "buy." Analysts see a 35 % growth rate, through the next year. The NTCT Price to Sales ratio (2.74), Price to Book ratio (2.02) and EPS Growth rate (50%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 82% of the outstanding shares. Over the past 52 weeks, the stock has traded between $6.06 and $9.59. A stop-loss of $7.50 looks good here. Note that the firm is expected to report Q1 results in late July.

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