Diamond Foods ( DMND) processes and markets culinary, snack, in-shell and ingredient nuts, which are primarily sold through two main product lines: Diamond of California and Emerald Nuts. We upgraded the company's stock from a hold to a buy in April 2009 on the basis of Diamond's good cash flow from operations, notable return on equity and growth in revenue, net income and EPS.

For the third quarter of fiscal 2009, Diamond reported revenue growth of 11% year over year. Although this trailed the industry average, EPS improvement from 7 cents to 16 cents per share indicates that the company's revenue growth trickled down to its bottom line. EPS growth has in fact been trending positive for the past two years, and we feel this should continue. Diamond's net income increased significantly in the third quarter when compared with the prior year's quarter, rising 144.1% from $1.11 million to $2.7 million. Net operating cash flow also increased significantly, rising 126.48% to $8.75 million. In addition, the company's return on equity improved slightly and can therefore be considered a modest strength for Diamond.

Looking ahead to full-year results for fiscal 2009, Diamond anticipates non-GAAP EPS in the range of $1.31 to $1.36, along with net sales of $550 million to $565 million. Guidance was raised from previously announced expectations on the basis of third quarter results. We find the company's debt management to be generally poor, but feel that the strengths detailed above should outweigh this potential weakness.

NCI ( NCIT) is a provider of information technology services and solutions to U.S. federal government agencies. The company focuses on designing, implementing, maintaining and upgrading IT systems and networks. NCI has been rated a buy since February 2008 based on its healthy growth in revenue and net income, solid stock price performance, impressive record of EPS growth and largely solid financial position.

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