If I Had to Pick One Stock Outside of the United States…
The recent selling in small-cap stocks has provided numerous investment opportunities to accumulate on price weakness, albeit the stock market could see more weakness.
A high-potential region that I have discussed in the past is Israel, which has turned into the technology incubator of the Middle East and is an investment opportunity.
I have been following Israeli companies for years, and in that time, I have come across numerous high-growth and rewarding technology and healthcare companies that make the country an excellent investment opportunity.
Israel ranks third as far as foreign companies on the NASDAQ, trailing only China and Canada.
What makes Israeli companies intriguing as an investment opportunity is the strong trust from this region. You actually never hear about financial irregularities out of Israel, which makes the country a solid investment opportunity.
A small-cap technology Israeli company that I’d watch as an investment opportunity for the speculative investor is EZchip Semiconductor Ltd. (NASDAQ/EZCH), which has a share price of $25.44 and a market capitalization of $745 million.
The company is a fabless semiconductor company, meaning it doesn’t manufacture anything; rather, it simply develops the chip and produces it via a third party. EZchip designs ethernet network processors for networking equipment companies, such as carriers, along with cloud, data center, and enterprise network equipment. The company will soon be launching its newest and most powerful network processors that will drive revenues higher.
The risk with EZchip has been with the mounting concerns that some of its clients are developing their own in-house chips. So far, it has not been a factor, but it could be if EZchip began to lose business from its key client, Cisco Systems, Inc. (NASDAQ/CSCO), which accounts for about 40% of EZchip’s annual revenues.
But overall, the company’s revenue picture looks good. Revenues increased in each year from 2004 to 2011, with a 30% jump to $70.85 million in 2013. The growth is expected to continue at 25.0% to $88.54 million in 2014, followed by 19.2% to $105.53 million in 2015, according to consensus Thomson Financial estimates.
On the earnings end, the company turned a profit in five straight years to 2013, following losses from 2003 to 2008. The growth is estimated to run into this year and next.
EZchip beat the Thomson Financial consensus earnings-per-share (EPS) estimates in eight of the past nine quarters.
The stock is an investment opportunity trading at a reasonable 15.37 times (X) its estimated 2015 EPS and a price-to-earnings growth (PEG) ratio of 1.17.
The chart of EZchip shows an upward move towards $30.00, so I see an investment opportunity, based on my technical analysis.
Chart courtesy of www.StockCharts.com
I like the aggressive opportunity at the current price level, as the stock is down 22.44% from its 52-week high of $32.79, and well down from the $44.00 level in March 2012. The stock is down 2.97% over the past 52 weeks versus a 24.78% gain by the S&P 500.