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A few moments ago, I broke all of my trading rules---much the same way that I did with Dynamic Materials (BOOM) a few months ago. Kendle announced 2nd quarter earnings results this morning, and unfortunately missed expectations by a nickel. The market is in a "take no prisoners" mode and decimated the stock this morning. Kendle is trading at $28.22, down $(7.38) or (20.73%) as I write. I went ahead, believing that this was entirely overdone, and entered a purchase for 800 shares (!) of Kendle at $28.4799. Hopefully, I shall be correct on this move, as this is actually a larger than average purchase for me, totalling $22,783.92.
Let's review that earnings report and you will hopefully see why I would 'break' my trading rules and enter this stock purchase.
Net service revenue for second quarter 2006 came in at $62.1 million, an increase of 24% over net service revenue in the same quarter last year. Net income for the quarter came in at $4.29 million, up about 200% from last year's $1.44 million result. Again on a per share basis, this worked out to $.29/share, up sharply from $.10/share last year. Fully diluted "adjusted" net income, still worked out as $.39/share up over 100% from last year's "adjusted" fully diluted net income of $.19/share.
The Morningstar.com "5-Yr restated" is perfect. Almost perfectly steady revenue growth, earnings which dropped to a loss in 2002 at $(4.30)/share, have improved steadily, turning to a profit in 2004 at $.27/share, increasing to $.76/share in 2005, and $.93/share in the TTM.
Even the number of shares outstanding has been fairly steady at 12 million in 2001, increasing to 14 million in the TTM.
Free cash flow was $12 million in 2003, $18 million in 2005, and $17 million in the TTM.
The Morningstar balance sheet shows $51.6 million in cash and $80.6 million in other current assets, easily paying down the $60.3 million in current liabilities and the $1.5 million in long-term liabilities combined.
Anyhow, wish me luck. I am not following my intensely disciplined trading rules with this purchase. I am just trying to use my head and reserve the flexibility to make a purchase like this when things get entirely overdone imho.
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