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Why Hollysys Automation Technologies, Ltd. Shares Popped

By Steve Symington - Feb 18, 2014 at 10:26PM

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Is Hollysys' jump meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Hollysys Automation Technologies, Ltd. (HOLI 2.58%) jumped more than 10% during Tuesday's intraday trading, then settled to close up around 5% after the company turned in encouraging fiscal second quarter 2014 results.

So what: Quarterly revenue rose 75.9% year-over-year to $153.4 million, which translated to adjusted net income growth of 87.5% to $0.45 per share. By contrast, analysts were only expecting earnings of $0.27 per share on sales of $114.33 million. 

Now what: Going forward, Hollysys management also increased both the top and bottom ends of their fiscal year 2014 revenue guidance by $40 million to $500 million to $530 million. Analysts were only modeling fiscal 2014 revenue of $479.67 million.

In addition, Hollysys increased its 2014 net income guidance to a range of $84 million to $86 million, up from the previous range of $65 million to $69 million. 

As a result -- and putting aside the fact Hollysys has minimal debt and roughly $135 million in cash on its balance sheet -- shares look cheap trading at just 12.7 times this year's expected earnings. Even after today's pop, that's why I think Hollysys should still stand to reward patient long-term investors.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Hollysys Automation Technologies Ltd. Stock Quote
Hollysys Automation Technologies Ltd.
HOLI
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