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Caseridge TechSys Weekly Commentary: The Medal Contenders

|Includes:EXFO Inc. (EXFO)

We’re about 10% of the way through the 2010 calendar year and in honour of the 2010 Vancouver Olympics we decided that it’s time to take a snapshot of the leading contenders for the “top performing” stock of the year of those companies in our “2010 Top Picks List”:

Company Name

Ticker

Recent Price

GMM Target

 

“Consensus”

Target**

% Change [YTD]

EXFO Electro Optical

TSX:EXF

 $      5.94

$6.00

$5.26

47.39

BIOREM Inc.

TSXV:BRM

 $      0.78

$2.00

NA

47.17

Icron Technologies Corp.

TSXV:IT

 $      0.42

$1.00

NA

29.69

Vecima Networks Inc.

TSX:VCM

 $      7.00

$8.00

$9.33

20.69

MOSAID Technologies Inc.

TSX:MSD

$    23.00

$ 30.00

$25.95

20.93

Click to enlarge

 

The top performer to date this year is EXFO Electro Optical Engineering Inc., the Quebec based provider of test and service assurance solutions for the telecommunications industry.  The catalyst for the rapid appreciation here was a very strong November quarter (released in January) that resulted in an across the board adjustment in forward growth and earnings estimates for 2010.  As a result, even with the nearly 50% gain in the share price, the forward looking PEG ratio today is lower than it was at the start of the year.  The consensus analyst estimate, which is typically built on a “multiple of earnings model”, indicates that the stock is a “sell” with their target price at an 11% discount to the closing price on February 12th.  Our GMM target price, which is based on a gross profit/gross margin model  is currently at $6.00, indicating that that the shares might be considered a “HOLD” at present with nominal upside potential.  We believe that strong upside potential still exists – perhaps to the $10.00 level, however we are waiting for the February quarterly results before making an adjustment to our GMM target price.

Two of the top five – Biorem Inc. And Icron Technologies – caused a bit of a stir when we named them to our “Top Picks” list as they are “picocaps” with enterprise values of less than $15MM and that are not widely known or covered by “street analysts”.  We hope that with their strong performance to date and with the high expectations that we have for them based on our GMM target prices that they will continue to gain traction in the market place.

Vecima and Mosaid are two well known Canadian tech companies that are more or less “old standards” in institutional portfolios.  With 20%+ gains to date in each of these companies we have seen street analysts rushing out to revise their target prices upward.  We have not made adjustments to our targets for either company.  There is upside potential in both of these names, though with some typically strong volatility.

We hope that you enjoy this weeks’ Caseridge TechSys DealBook.  To subscribe to our full market reports, join the Caseridge DealBook Network at is.gd/8vjNh.



Disclosure: I do not own any of the stocks mentioned.
Stocks: EXFO