FORBES pick : CKCM

[luka]

Stock Of The Week
of Pulling Click Commerce From Weak Hands
John Dobosz 02.23.06, 6:00 AM ET


Jordan Kimmel, editor of the Magnet Investing Report, recommends buying shares of Click Commerce, the Chicago-based supply chain management solutions provider.

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Click Commerce reported fourth-quarter and full-year 2005 operating results on Tuesday. The company beat the $0.43 per share (excluding one-time items) consensus quarterly earnings forecast of the two analysts who follow Click Commerce by a penny. Earnings per share jumped 153% over the fourth quarter of 2004, and shot up 172% above 2004 EPS. Revenue for the quarter was up 173%.

Despite the strong reported growth, shares of Click Commerce declined in after-hours trading following the announcement, and by mid-day Wednesday, had dropped 6% to just above $26 per share. Even with the drop, shares are up 111% over the past 12 months, and trade at a lean price/earnings growth (PEG) ratio of 0.73. On a generally accepted accounting principles (GAAP) basis, Click Commerce has a below-market price-earnings ratio of 16 times last year's earnings. Its market capitalization is $293 million.

Kimmel screens for what he calls "magnet" stocks with high relative strength, increasing institutional ownership and accelerating growth in sales, profits and profit margins. Click Commerce fits all of his criteria, and he regards the pullback as a buying opportunity.

"It is commonplace for stocks, regardless of their numbers, to sell off on their earnings announcements," says Kimmel. "We believe it is critical to have your homework done and not to get caught up in the emotional day trading and reactionary trading that cause you to lose your focus. Click Commerce remains in a very strong up trend, and institutional ownership, while still modest continues to increase. We like opportunities such as this to build positions during weakness. Only those with a very short time horizon would be trying to lock profits in here."

Kimmel also likes the debt-to-equity ratio of 0.12 and the company's "four consecutive quarters of accelerating revenue, earnings and margins."