On our weekly superstock watchlist on 28th Dec 2015 , we initiated coverage on Integrated Electrical Services (IESC). Subsequently price ros...

IESC Update 1

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On our weekly superstock watchlist on 28th Dec 2015, we initiated coverage on Integrated Electrical Services (IESC). Subsequently price rose rise rapidly with minimal pullback. I dropped the stock off my watchlist on 1st Feb 2016 as I thought I had missed the trade. The price movements in the past 2 weeks and the recent earning release made me take a second look at the stock.



Technical


In the week ending 25 Jan, IESC had a sharp spike. A week later, a sharp decline more than wiped out the gains in the previous week. Trading volume for the two weeks was high despite no known news. The following week, there was a hammer on the weekly chart, showing signs of bullishness despite its relative small size.

With all the price movements, IESC had not closed below the 10 week moving average. This is clue institutions might be accumulating the stock at the 10 wMA, a possible ‘magic line’ for the stock. When price is close to the ‘magic line’, it is a low risk entry as the upside is high and the stop can be set just below the 10 wMA.

Fundamental/ Metrics

*EPS include one time tax benefit

Earnings Release

IESC reported its financial results on 8th February 2016. There is no sequential improvements from the great result a quarter ago, but year-on-year, this is a fairly decent result.

Excluding one-time tax benefit of $1.3 million, revenue and earnings per share increased by 10.6% and 40% respectively. The strong results are contributed by both organic growth and three new acquisitions. All four business segments of IESC saw increase in revenue from the quarter a year ago. The Commercial segment was the key driver of revenue and earnings for the quarter.

Backlog

IESC saw an increase in backlog of approximately $289 million as of December 31, 2015, compared to approximately $270 million as of September 30, 2015, and approximately $262 million as of December 31, 2014.

Fairer Valuation

When I initiated coverage of IESC last December, based on annualised earnings for the quarter, IESC is just trading at 7.4x earnings. Due to a weaker Q1 FY2016 result, the stock is now trading at 14.1x earnings.



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All information in The Trader Diaries (TTD) does not constitute to investment advice or recommendation to buy, sell or hold. Readers are advised to consult their financial advisors prior to making any investment or pursuing any investment strategy. TTD will not be liable for any losses resulted from information published or shared from the blog.