The end of the year is a time to look back and look forward...and when choosing the latter, there are some great opportunities out there, notes Richard Moroney of Upside.
Cardinal Financial (CFNL)scores at least 90 for five of six Quadrix categories and earns a maximum Overall rank of 100.
The regional bank serves the Washington, DC area, one of the nation's strongest labor markets. Robust activity from mortgage refinancing drove Cardinal's 31% revenue gain in the first nine months of 2012. Deposits advanced 21% in the September quarter, while loans increased 16% on strong growth in real estate construction.
The stock has rallied 34% since March, but still looks cheap at 11 times trailing earnings, 33% below its three-year average and 20% below the median for regional banks in the S&P 1500 Index. Washington's healthy housing market bodes well for Cardinal's mortgage-banking business.
Rising consensus estimates project growth in per-share profits of 50% in the December quarter and 39% in the March quarter. Cardinal is a Best Buy.
Neustar (NSR)
US
and Canadian telecom providers route nearly all domestic calls through
Neustar's directory services, giving the company a high
proportion of recurring revenue.
Sales growth has exceeded 15% in seven straight quarters-and 35% in the first three quarters of 2012. Cash provided by operations, up in eight of the past nine quarters, rose 22% to $262 million for the 12 months ended September. About 17% of that cash went toward capital spending, while repurchases shaved 9% from the share count.
Compared to the projected 77% growth for per-share profits in 2012, the 2013 consensus of 7% growth seems conservative. Shares trade at just 12 times the 2013 estimate.
At 15.5 times trailing earnings, the shares trade at a 12% discount to their five-year average. The stock's near-term direction could hinge on a key contract that comes up for renewal in March. But assuming the trailing P/E holds at 15.5 and profits match the 2013 consensus, the shares would rally 24% by early 2014.
Neustar, which earns a 93 Overall score, is a Best Buy.
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