OMNOVA Solutions Inc. (NYSE: OMN, OMN message board) is a growth oriented companies, that promises high returns. Although the stock price has already traveled rather high, an earnings update released at the end of September was simply too good for the stock price rally to stop here.
In the third quarter, even under lower revenue (compared to a year ago period), the company has managed to cut down costs of revenue and reduce their debt, which allowed for lower interest payments. Profit for the third quarter was 3 times that of a year ago period and thus the stock quickly become undervalued on assumption the company can keep these earnings up.
The company currently holds a PEG ratio of 0.33, which means the share price is way to low for expected earnings growth. The price is already making a new 5 year high with every move up. Successful and confident crossing of important resistance just below $7 is a promising sign. With some minor corrections on the way the stock should climb into the two digit price zone in the coming few months.
Monday, as the start of the week usually gets the most price action, and so it was strange to see such a strongly trending stock to come up with a doji candle for the day. Despite signs of possible correction, the stock continued with a gap up on Tuesday on strengthening volume.
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