Thursday, April 7, 2011

Resources Connection Inc (NASDAQ: RECN) Q2 2011 Price Target

Recent price: 15.69$
P/E Ratio: 33.42
3 Months Target Price: 20$

Company Description
According to Reuters, we know that Resources Connection, Inc. (Resources), incorporated on November 16, 1998, is a multinational professional services firm. Its operating entities provide services under the name Resources Global Professionals (Resources Global). The Company provides finance and accounting services, information management services, corporate advisory, strategic communications and restructuring services, risk management and internal audit services, supply chain management services, acturial services, human capital services, and legal and regulatory services. On May 12, 2009, the Company acquired certain intangible assets comprising the Ohio-based professional services business of Kenwood Cooper LLC operated under the name Xperianz (Xperianz). In November 2009, the Company acquired certain assets of Sitrick And Company, a communications firm and Brincko Associates, Inc., a corporate advisory and restructuring firm with operations primarily in the United States.

Confidence Margins
Strong resistance $21.94 (+40%)
Light resistance $20.33 (+30%)
Light support $14.45 (-8%)
Strong support $11.00 (-30%)

Shares of Ressources Connection Inc. tumbled on Friday April 1st, when the company issues results for it's financial third quarter. The company significantly improved it's earnings compared to last year but results came short of what analysts were expecting. This provides investors with a temporary sale on Ressources Connection Inc. This will be a good candidate for a long position in the coming months.

Entry strategy
For the cautious investor:
Buy the stock for 16$ or less.

For the risk-taking trader:
The August 2011 17.50$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 85$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 20$, or keep it until 22$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 20$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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