Through The Fly's Eyes: Brooks Automation

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Fashioning the Machines that Integrate your Circuits

As in most industrial endeavors, profits in the semiconductor manufacturing business are a direct function of production efficiency. A leader in the art of creating the automated systems used to make quality chips is headquartered in Chelmsford, Massachusetts.

Brooks Automation (BRKS) provides production tools and factory automation products for semiconductor makers and suppliers of chip-making equipment. Products include the vacuum systems, wafer handling systems and thermal conditioning modules necessary to efficient chip manufacturing. The company also sells specialty equipment to manufacturers of flat-panel displays and data storage devices. Major customers include Lam Research (LRCX) and Novellus Systems (NVLS).

The BRKS share price rose last week, following completion of the company's sale of its Brooks Software unit to Applied Materials (AMAT) for $125 million in cash. The move popped the shares out of a late March "cup" into the early April "handle" of a Cup & Handle formation. The price is showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".

Brokers recommend the issue with one "strong buy", four "buys," six "holds" and one "sell." Analysts see a 15% average annual growth rate, through the next five years. The BRKS Price to Sales ratio (1.75), Price to Book ratio (1.61), Price to Cash Flow ratio (15.43), Sales Growth rate (76.38%) and EPS Growth rate (258.78%) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 89% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $10.56 and $18. A stop-loss of $15.25 looks good here. Note that the firm is next expected to release quarterly results in late April.