Icarus Signal New Entries For Today

This story features IRESS LIMITED, and other companies. For more info SHARE ANALYSIS: IRE

Daily update on share prices and consensus price targets.

By Rudi Filapek-Vandyck

Could there possibly be more to consensus price targets than initially meets the eye? I certainly think so. On occasion, consensus price targets converge with identified resistance levels in technical analysis and that is, for obvious reasons, where matters become very interesting. I have written about this in the past, see "Everything You Need To Know About The Banks" from March 14 this year.

My attention was again piqued this week after reading a technical assessment for Iress ((IRE)) shares by The Chartist. Iress is one stock that is constantly on my radar as it tends to trade close or above consensus price target by default. Investors who owned the shares throughout the years have done well, but the observed pattern suggests timing is more important than ever for those who don't own, but have the ambition to.

As clearly shown on the price chart below, Iress shares have tried four times over the past eight months to beak above the $9.40-$9.60 zone, and each and every attempt has failed. In terms of potential returns this translates into: investors who bought the shares towards the peak during each such attempt are today looking at no net gains, while others could have bought as low as $8.40 during the period, 10.5% below today's share price.

Iress is traditionally a high multiple stock, but still offers a relatively high dividend yield. At the current share price of around $9.29 (consensus target at $9.37) the Price-Earnings ratio (PE) for FY11 sits at 19.8 and this only drops to 17.3 on present consensus forecasts for FY12.

Implied dividend yields are still 4.4% and 5.0% for FY11 and FY12 respectively. If market expectations prove correct, Iress should continue providing shareholders with double digit growth in the years ahead. In a general context wherein forecasts are being cut and are likely to remain in a downward trend for months to come, it is not difficult to see why investors continue chasing the stock.

As stated in the opening sentences, there is a technical analysis angle to this story, with The Chartist reporting solid technical resistance lies in the above mentioned $9.40-$9.60 zone, so don't expect the shares to break above consensus price targets anytime soon. Investors might have to wait until August, when stockbrokers roll forward their models into FY12 to see those targets increase. That might be the signal that technical support might finally give in. In the meantime, expect Iress shares to swing in between close to target and above target, as the shares essentially have done over the past eight months.

For those who like to become a longer term shareholder: paying attention to valuation and timing can do wonders for future returns. The past eight months provide the classic example for this. Also, twelve months ago investors could have bought the shares for $9.29, which, again, would have led to limited investment returns over the period.

Another stock that has a similar story to tell as Iress is Monadelphous ((MND)). No surprise thus, Monadelphous shares have now -again- left the stocks that are trading close to targets, to join those trading above target.

Iress was joined by Nomad Building ((NOD)) -share price weakness- and by Spark Infrastructure ((SKI)) as newcomers on the list of stocks that have approached the vicinity of consensus target.

There are now 27 stocks trading above target.

Tabcorp ((TAH)) has landed in the Bottom 50, but this has more to do with adjustments post the demerger of Echo Entertainment ((EGP)).

Investors should consider the information and data are provided for research purposes only.

Stocks <3% Below Consensus

Order Symbol Current Price($) Consensus Price($) Difference(%) 1 IRE $ 9.35 $ 9.37 0.25% 2 NOD $ 0.10 $ 0.10 0.00% 3 SKI $ 1.28 $ 1.30 1.88%

Stocks Above Consensus

Order Symbol Current Price($) Consensus Price($) Difference(%) 1 MND $ 19.51 $ 19.23 – 1.45%

Top 50 Stocks Furthest from Consensus

Order Symbol Current Price($) Consensus Price($) Difference(%) 1 NXS $ 0.32 $ 0.49 55.56% 2 TAH $ 3.35 $ 7.92 136.42%

To see the full Icarus Signal, please go to this link

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Click to view our Glossary of Financial Terms