We’re more than half way through 2010 and this year has seen a significant pickup in the number of quality IPO’s, so I thought I’d rank the top 10 up to this point in the year based on fundamentals. Part I will highlight the first five, part II the next five and I’ll follow that up with a report taking a look at some of the most promising IPO’s that may begin trading in the last quarter.
Camelot Info Systems (CIS): This is the highest rated IPO that I currently track with a fundamental score of 29/30. The company provides enterprise application services and financial industry information technology (IT) services in China. It’s the largest provider of enterprise resource planning in China and names HP, Accenture and IBM as customers.
Camelot has posted significant growth every year it’s been in business and that growth continues today despite a shaky world economy. In 2009, they experienced EPS growth of 60% and is posting record growth again this year with an estimated 113% growth for 2010. Revenue growth has accelerated in each of the past four quarters.
Technically, the stock remains extremely bullish, but very overbought in the shorter term. After a month long flat base formation, the stock exploded higher Aug 18th and hasn’t looked back. It’s up nearly 50% in under two weeks and buy volume continues to come in above average. It’s best to look for a retracement of about 50% from the breakout point above $11, so a return to the $12 – 13 area would provide an ideal entry point.
Higher One Holdings (ONE): Another top rated IPO with a fundamental score of 27/30. Higher One is a company that provides technology and payment services to the higher education industry in the US, eliminating the need for paper work and checks. What a novel idea! Students are allowed to pay for tuition and other fees through credit, debit or eCheck and are provided with an FDIC insured deposit account.
Higher One is another IPO on the path of big growth, reaching profitability after its first year in business in 2006 and not looking back. In 2008, earnings really accelerated with 225% growth over the previous year, followed by 138% growth in 2009 and 65% growth expected this year.
Technically, the stock has really struggled and that may offer an outstanding opportunity soon. Out of the gates, the stock ran up nearly 30% from the IPO price of $12 but really began to fall apart this month and currently trades close to $11/share. While it will take some time to confirm a bottom and carve out a new base, the selling pressure is beginning to subside and the worst may be over. Definitely a top rated IPO to put on the radar.
Financial Engines (FNGN): The 3rd highest rated IPO for 2010 is Financial Engines which provides independent, technology-enabled portfolio management services, investment advice, and retirement help to participants in employer-sponsored defined contribution plans, such as 401(k) plans. Its services are provided directly or through one of eight retirement plan providers – ACS, Fidelity, Hewitt, ING, JPMorgan, Mercer, T Rowe Price or Vanguard. JP Morgan sponsored services accounted for just under 20% of revenues last year. Its customer list includes 25% of Fortune 500 companies and nearly half of the Fortune 20 companies.
The company had been investing heavily in its automated solutions and didn’t turn a profit until last year, but did so in a big way posting an EPS of .20. EPS Growth for this year is expected to come in at 45% and 28% for next year. Clearly the investments they have made is paying off in a big way, so you’ll want to put this company near the top of your IPO watch list.
Technically, the stock began correcting just a few days after going public in March and is now in the process of carving out its first base. What we have shaping up is a cup with handle base formation and a breakout above the 16.16 level would provide confirmation that the stock may be ready for a sustained move up.
Green Dot (GDOT) comes in at the 4 spot with a very good fundamental rank of 26/30. They are the leading provider of reloadable prepaid debit cards in the US and command a 40% market share. The target customer is low/middle class who have trouble getting traditional checking and saving accounts.
Financially, it’s a company that has posted outstanding and consistent growth over the past five years. Beginning with its first profitable year in 2006, growth really began to ramp with 375% EPS growth in 2007, 158% in 2008, 104% last year and 26% growth expected this year. Yes, growth has been declining, but that’s expected for most companies that approach $100 million in revenue in a quarter.
Technically, the stock may be ripe for an entry. It broke out from its first consolidation on August 9th running up a quick 10%. Current market weakness has stalled the stock a bit and it has retraced much of that move providing a 2nd chance opportunity.
SPS Commerce (SPSC) rounds out part I of this top IPO report in the 5th spot with a good fundamental rank of 25/30. The company is a leading provider of on-demand software as a service for supply chain management solutions worldwide.
This is another IPO company that recently turned to profitability. Following losses in 2004 – 2008, it posted its first profitable year last year with an EPS of .12. EPS is expected to more than double this year before moderating a bit in 2011. All in all, a solid company that may be a buyout target at some point.
Technically, the stock has been correcting following an impressive open in April. It remains mired in a long downtrend, but is beginning to show signs of stabilizing. In my opinion, it’s too soon to consider an entry since the downtrend remains, but in another month or so, it may emerge from a downtrend and offer a real nice entry point.