Undervalued Tech Stock Kulicke & Soffa Industries Boasts 13.9% Free Cash Flow Yield & Ultra-Low PEG Ratio

Jul. 05, 2011 1:07 PM ETKLIC, XLK
Shiraz Lakhi's Blog
272 Followers
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.
By Shiraz Lakhi - Many investors who follow my articles and trade ideas here on SA will know I look primarily for strong free-cash-flow-yield metrics, as a basic starting point for potential plays - preferably within a 'sector' which has become technically oversold.

One such company which appears on my radar today, is Kulicke & Soffa Industries (KLIC). This semiconductor equipment and materials company currently generates leveraged-free-cash-flow of $89.43 million on a trailing 12 month basis. The last trading session valued the business (Enterprise Value) at $641.44 million, hence returning a significant free-cash-flow-yield (FCF/EV) of 13.9%.

KLIC Stock Chart & Trend Signal Indicator

Additional metrics in favor of KLIC include: a low PEG ratio of 0.39, a quick-ratio of 3.24 (strongly bullish), and a current-ratio of 3.82 (strongly bullish). KLIC currently trades at $11.41 per share, around 116% above its 52 week low.

With fundamentals in favor of KLIC, I look to time my entry into the stock. Here, a simple rule is adopted - to trade when the sector for the specific stock (in this case, the technology sector (XLK) becomes oversold, and exhibits multiple technical buy-long signals.

A simple sector based technical analysis indicator, such as the Technology Sector Trend-Indicator, freely available at tradepilot, is applied - where for example, if I am looking at selective stocks within this sector, I wait for the Trend-Indicator to become oversold, and to signal a fresh reversal/new green-bar long signal.

The timing method effectively reconciles 'both' fundamentals and technical analysis into a disciplined stock selection and entry process - knowing 'which' stocks to focus on, and 'when' to buy them.

By Shiraz Lakhi - Indenpendent Investor/Entrepreneur

Enterprise Value/Free-Cash-Flow Data Sourced From Yahoo Finance. Stock Data & Performance Analytics Sourced From TradePilot.com.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You