This Digital Media Powerhouse Is Advertising Strong Growth

by: Joshua Hayes

DG Fastchannel (NASDAQ:DGIT) operates a digital network connecting over 5,000 advertisers with 21,000 TV, cable, radio, network, and print destinations and is the nations leading provider of digital media services to the advertising industry. While this may not sound that exciting it allows rapid, cost-effective and reliable electronic transmission of spot distribution and provides a high level of quality, accountability and flexibility to both advertisers and broadcasters.

This Commercial Services-Advertising company is clearly head-and-shoulders above the rest of the 33 other stocks that make up this industry group. As ranked via the data compiled by (data provided by William O'Neil + Co. Incorporated), the stock ranks 1st out of 34 stocks in EPS rating, 3rd out of 34 stocks in the RS rating, 3rd out of 34 in Accumulation/Distribution rating, and 3rd out of 34 stocks in Sales, Profit Margin, and ROE rating.

These strong numbers can be seen via the impressive YOY quarterly growth going back the past eight quarters. EPS growth, YOY, has seen impressive gains in seven of the past eight quarters with gains of 39%, 52%, 57%, (-51%), 5%, 58%, 21%, and 116%. During the same time, sales have been even more impressive with gains of 59%, 65%, 68%, 42%, 27%, 17%, 11%, and 31%. These numbers are nothing short of extremely stellar and it appears there is more room for growth with 2011 EPS estimates expecting growth of 29%.

On top of this growth, DG Fastchannel has a strong Return-on-Equity of 15% and a cash flow of $3.04. These numbers are more-than-likely the reason mutual fund ownership of this stock has grown from 52 to 57 to 60 funds during the past three reported quarters. On top of that, management still owns 17% of the shares outstanding which shows that they are invested in the future growth of the company also.

DG Fastchannel also is part of strong overall industry group that has some other strong performing stocks moving higher like National Cinemedia (NASDAQ:NCMI), Valueclick (VCLK), Insignia Systems (NASDAQ:ISIG), Focus Media Holdings (NASDAQ:FMCN), Schawk (NYSE:SGK), Harte Hanks (NYSE:HHS), Charm Communications (NASDAQ:CHRM), SuperMedia (NYSEARCA:SPMD), Valassis Communications (NYSE:VCI), China MediaExpress (OTCPK:CCME), and MDC Partners (NASDAQ:MDCA). It is always a plus when looking to go long a strong stock that it has other well performing stocks in its industry group so it is very positive to see that DG Fastchannel is in good company.

While the fundamental picture of DG Fastchannel is extremely bright, the technical pattern of this stock is just as beautiful. DG Fastchannel has been in a strong uptrend since retaking the 50 and 200 day moving average in September 2009 on strong volume. Since then the stock has climbed the 50 day moving average higher finding support all along the way at this very important technical support level.

What is more impressive is that despite the market selling off in May DG Fastchannel held up extremely well and continued higher on strong accumulation. As the market attempted to take another leg down in June, DG Fastchannel actually looked like it may have wanted to pullback also. But the stock found support, once again, right on the 50 day moving average and despite the below average volume it still is clearly getting more volume (accumulation) on the up days compared to volume on the down sessions (distribution).

With DG Fastchannel hugging the 50 day moving average right here, I am looking to get long this stock with the next higher volume bounce off of this key moving average. If there is not a higher volume bounce off the 50 day moving average and the stock continues to build a base I will be looking to get long the next higher volume breakout to new highs out of the current base it is attempting to build.

As always, a defensive plan is needed in case the bounce or breakout does not occur. Therefore, if the stock breaks the 50 day moving average here on volume, I will look for another proper base to setup before attempting to go long. Also, if I do go long and the stock reverses lower with the market and closes below the 50 day moving average, I will look to cut my loss short.

Click to enlarge:

Disclosure: No Positions