Alcon Raises Guidance as Stock Soars

Alcon Inc. (ACL) is a Switzerland developer of pharmaceuticals, surgical tools, contact lens care and other products for eye diseases and disorders. On April 23^rd it raised its expectations for 2008 earnings to $6.39-$6.49 per share on revenue of $6.4 to $6.5 billion, above previous guidance. 

This continues a very bullish trend of strong earnings for this medical company, which is standing out as the leader in a group that is slowly starting to rise as Cyberonics (CYBX), ABIOMED (ABMD), Exactech (EXAC), NuVasive (NUVA) and Edwards Lifesciences (EW) all have the same chart patterns the past six months. As this group comes into favor though, this company stands out based on the fundamentals. 

EPS has grown 17%, 16%, 40%, 27%, 25%, 31%, 13%, and 18% the past eight quarters. Along with that stunning growth for a big stock, sales are just as impressive with growth of 12%, 12%, 16%, 14%, 12%, 11%, 20%, and 16% the past eight quarters. This kind of growth in a company making billions is not only impressive it is incredible. 

2008 and 2009 EPS estimates are for a growth of 19% and 15% respectively but as they continue to raise guidance these estimates should rise which is the most important reason behind a stocks rise (its future expectations). Even though I currently cannot get the total number of funds' information on this stock, I do see that 26% of the shares outstanding are ownded by funds which shows that the smart money is still gaining an interest in this stock. 

And how could they not when a company has a ROE of 52%! That combined with a 29% EPS growth rate is the reason the 28 p/e is so cheap. Based on future growth, this is very cheap and in the lower end of its 5 year 22-42 p/e ratio range. A cash flow of $6.17 to an EPS in March 08 of $1.43 also shows that the company is rolling in money. That is normally the case with a 52% ROE with only 2% debt to shareholder equity.  

Investors Business Daily confirms this strength, with an EPS rating of 88, an RS rating of 87, a group RS rating of 67, an SMR rating of A, an Acc/Dis rating of B-, a composite rating of 94, a timeliness rating of B, a sponsorship rating of C, and an earnings stability rating of 3 (1 is best, 99 is worst).  

Overall this is a great stock but like with all my longs I refuse mediocre performance and unless this stock moves higher immediately, I will cut my loss with a close below the 50 DMA. 

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Disclosure: At the time of publication, Joshua did not have a position in ACL

Comments

[Joshua Hayes:]

Excellent pop today. The next time to get long is a pullback to the 50 DMA.

This is much better action than I expected. This is how every long should work.

2008 Jun 20 05:03 AM