If you're reading this, then odds are you already know Arotech Corporation (NASDAQ:ARTX) shares are up big-time today. You probably also know why ARTX is soaring... last quarter's results. What may not be fully appreciated about this defense contractor, however, is that its stock - even with today's huge advance - has a lot more upside to go before the bulls slow down.
For better or worse, ARTX has developed a reliable trading pattern since around this time last year. This pattern is framed by a rising support line, and an even-faster-rising resistance line, meaning the swings are getting wider as time marches on for Arotech Corporation. The swings are net-bullish, however, so a savvy trader can use the volatility to their advantage.
And now may well be the time to use it.
While Arotech shares are up a whopping 37% since hitting last week's lows, the upper edge of the trading range that has historically capped the rally is still miles away. In fact, it's so far away and rising so fast that assigning a value to it would be pointless. It would be well above $10.00, however, if we had to decide where this rally would hit a wall again. The chart of ARTX below tells the tale... higher highs, higher lows, and we just pushed off of the rising floor.
It's also worth noting how ARTX has responded bullishly to encounters with key long-term moving average lines. The 100-day moving average line (gray) sparked the turnaround in July of last year, November of last year, and in February of this year, and while that 100-day moving average line didn't stop the pullback in April, a near-brush with the equally-important 200-day moving average line (green) does seem to have had a bullish-bounce effect on Arotech Corporation shares.
With all of that being said, it should be noted that Arotech is a standout among its peers of size and ilk, and is deserving of a higher valuation.
While the trailing P/E of 33.0 is a little frothy, it's also not an indication of the company's normal operation. The forward-looking P/E ratio of 14.1 is more indicative of what ARTX is and does, and the market could easily justify a higher premium than that given the strong double-digit growth rates we've seen on recent years, and the huge 33% bump in revenue analysts are projecting for this year.
Bottom line? Arotech Corporation looks like a buy here.
For more trading ideas and insights like these, be sure to sign up for the free SmallCap Network newsletter. You'll get stock picks, market calls, and more, every day. Here's what you've missed recently.
No comments :
Post a Comment