Varian Semiconductor (VSEA) is growing rapidly and expects that pace to continue through the next fiscal year. This Zacks #1 Rank (Strong Buy) has earnings that are skyrocketing, great valuations and is in the top rated industry.
Don’t let the chart scare you away, all signs point to VSEA heading even higher.
Company Description
Varian makes ion implantation equipment used by semiconductor manufacturers.
Q1 Revenue Doubled
The company’s Jan 27 earnings surprise included revenue of $282.6 million, exactly doubling the $141.3 million 4 quarters ago. Net income grew at an accelerated pace, to $71.9 million from $16.6 million.
Earnings per share was $0.95, beating the Zacks Consensus Estimate by $0.08, marking 7 consecutive earnings surprises. The results were good, but what made it a great report was the optimistic guidance.
Thanks to increasing demand Varian guided higher than the previous quarter which set records for operating margins, net income and EPS.
Analysts Agree
All 6 analysts raised their estimate for full-year 2011 both before and after the number, significantly raising the consensus estimate. The average forecast is now $4.07, up from $3.22. That’s 92% higher than the fiscal 2010 figure. Next year’s estimates are also up, rising $0.63 to $4.10.
Fortunately, the expected growth is still priced at a steep discount. Shares are going for just 11 times this year’s estimate, which leaves the PEG at just 0.6 times.
Varian couldn’t get any hotter than it is right now. VSEA is currently the top rated stock, out of 8, in the top rated industry, out of 264, on Zacks.com.
The Chart
The only thing that may keep some people at bay would be the chart. It can be tough to jump in a stock on such a nice run, but remember those valuations and the fantastic earnings momentum.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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