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Tuesday, January 03, 2006


OVTI CGI's Top Pick for 2006

Complete Growth Investor has selected OVTI as the top pick for 2006. Here's an excerpt from the 17 pages on OVTI:

-OVTI has a maket cap of $940M-As of the end of last quarter (Jan.), the company had $315M in cash and equivalents and no debt. That's right, the company is trading for less than 3x its cash position. And with cash on hand, there is simply no possibility that the company is pulling any kind of Enron shenanigans to artificially inflate earnings.

-In the first three quarters of fiscal 05, the company has had cash flows of $100M, so that gives a run rate of ~$133M. On an enterprise value to cash flow basis (not FCF), this gives a ratio of 4.6, which indicates a very, very cheap stock. FCF for the trailing twelve months was $110.8M, giving a EV/FCF ratio of \n5.5 (still unbelievably cheap).

-The company's trailing PE is 13, and if the cash and equivalents are backed out, it is 8.7. Analysts estimate a growth rate of 25% for the company for the next five years, giving a PEG ratio of .51 for the company. Compare this with an average PEG ratio of \n1.42 for the semiconductor industry (which clearly includes a number of different type of chip/sensor producers, but has few companies that specialize in areas with expected growth rates anywhere near that of the camera phone, security, and automobile sensor markets) and \n1.51 for the S&P 500.

-To sum it up, OVTI is a severely undervalued, highly profitable, rapidly growing tech company in a hyper-growth market with a potential technology that could possibly significantly limit the competition.

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