Solid State
Solid State (SOLI) is a supplier of specialist industrial computer and electronic components. On 18 November, the company qualified for the Bill O’Niel screen, which filters for stocks that have recently enjoyed rapid earnings growth and also trade near their 52 week highs. Indeed, earnings have grown by 24% over the last year and are expected to grow by 59% over the next 12 months.
Back in May, Solid State also qualified for Stockopedia's Way II Winners screen. The company has appreciated by 82% since it qualified for the Way II screen. To make the grade for this screen, companies needed to have a high ROCE, alongside dynamic earnings growth and strong Relative Strength over the last five years.
So the growth is there; the momentum is there, but is Solid State a dynamic growth company selling for a cheap price? The company does have a low ValueRank (29), suggesting that the company may be expensive. However, some investors justify paying a high price by pointing to rapid earnings growth. The PEG ratio is a useful tool to compare the price with the growth rate. The lower the PEG, the better. Solid State's PEG is 0.4 (using the historic PE - 25 - and Rolling EPS growth rate - 60%).
Where is this growth and momentum coming from? It is partly supported by acquisitions. In May 2013, the company acquired Q-par Angus Ltd (Q-par), which Solid State's management describe as 'one of Europe's leading experts in microwave and RF engineering with specialisation in antenna systems'. Contract wins have also played an important role. Back in July, the company announced that its largest division, Steatite, had been selected by the Ministry of Justice as the supplier of monitoring hardware for GPS offender tagging.
It is also interesting to note the Solid State is a low Beta stock. Beta indicates how sensitive a company is to market movements. If a stock’s price tends to rise more than the market on up-days and fall more than the market on down days, it will have a Beta greater than 1. But if it isn’t as sensitive to market movements, rising less and falling less than the market, then it will have a
