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Com Dev shares raise ‘flags'
Monday, May 30, 2005
Trading in Com Dev International Ltd. shares soared to five times the average daily trading volume two days before the company reported a jump in second-quarter sales to near-record levels, news that has driven the stock almost 15 per cent higher in the last two sessions.
According to Measuredmarkets Inc., a company that tracks peculiar trading patterns, Com Dev stock registered 17 trading flags on Tuesday, May 24, a day when both the volume and number of trades was exceptionally large.
Measuredmarkets examines the closing price, the trading volume and the number of transactions in a stock and compares them against patterns in nine prior periods. When a pattern is breached, a flag is registered. The maximum possible number of flags in any day is 27.
Some 646,215 shares changed hands last Tuesday, about five times the average daily trading volume of 129,276 over the previous 12 months.
“Were the large number of transactions on the 24th in any way attributable or anticipating the news that came out on the 26th, which the market has treated favourably,” asked ex-stockbroker Christopher Thomas, the president of Measuredmarkets.
Shares of Com Dev, a Cambridge, Ontario-based designer and maker of satellite components, climbed 17 cents or 6.75 per cent to close at $2.69 in Toronto Monday, bringing its rally since reporting its second-quarter results to 14.5 per cent.
After the close of trading last Thursday, Com Dev said its second-quarter profit dropped to $1.8-million or 3 cents a share from $3.6-million or 6 cents a share a year earlier. Analysts were expecting earnings of 4 cents a share.
Sales in the three months ended April 30 climbed to $32.4-million from $31.4-million.
Com Dev's CEO John Keating said that he was confident that the company's business is growing alongside the addition of new customers and forecast an order backlog worth $64-million by quarter's end.
“In the second quarter of 2005, several milestones on key programs that were late in the first quarter were completed and billed, and, in many cases, forward looking schedules are now showing significant improvement,” Mr. Keating said. “Our negotiation activity is still very robust and we are confident that our recent performance improvements have positioned us to not only win new business, but to execute that business more effectively thereby growing our revenues, gross margins and profitability.”
Clarus Securities Inc. analyst Spencer Churchill said Com Dev delivered solid quarterly growth with near-record sales and left his outlook for 2005 earnings growth of 10 per cent unchanged. He said capacity expansion activities are now finished and expects margins will recover in the third quarter of 2005.
Mr. Churchill has a “buy” recommendation on Com Dev stock and 12-month price target of $3.80.
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