It's a Prime Time for Tech Turnarounds

Finally, the sell side appears to be underestimating the recovery earnings potential in Asyst Technologies(ASYT). This leading maker of semiconductor and flat-panel display capital equipment trades for a true turnaround multiple of 20 times fiscal 2005 consensus earnings estimates, although these estimates are too low. However, the company should approach its $1 per share normalized profit run rate in the next three or four quarters.

The stock would have a decent run when the Street sees sustainable improvement in the company's margin structure. The company trades for around 50% of run-rate revenue but has hit 200% in each of the last 10 years. Even adjusting for a business shift mix, a trade to 1.2 to 1.5 times would represent a double in the shares from today's depressed levels.

Naturally, these turnaround ideas require a healthy economy and continued traction in the recovery for capital spending to come to complete fruition. But if past is prologue, don't expect to purchase turnarounds cheaply on a reported P/E basis. By the time a recovery is well established, the peak in the stock may have already occurred. That first big dip may represent another trading opportunity, but the profit-taking panic is gist for another column. Stay tuned.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider MRV Communications and Asyst Technologies to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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