Altera Corp. (ALTR) primarily makes programmable logic devices (PLD). Its customers are in the consumer, industrial, and storage sectors and its markets its products through distributors and sales personnel.

The stock recently got a nice boost after releasing strong second-quarter results. Earnings per share came in at 32 cents, 18.5% ahead of the consensus estimate. This was the third quarter in a row in which earnings beat estimates by at least 17%. Additionally, the company raised its sales guidance midpoint for the third quarter.

Other metrics were excellent as well during the quarter. These datapoints were taken directly from the press release: First half cash flow from operating activities was $226.8 million. Altera repurchased 65,000 shares of its common stock during the second quarter at a cost of $1.4 million. To date during the third quarter, Altera has repurchased an additional 526,000 shares at a cost of $10.4 million. Altera ended the second quarter with $1.2 billion in cash and investments.

CEO John Daane had this to say:

“The second quarter exceeded our expectations for growth and profitability. Our 90-nm FPGAs were the largest growth drivers and 65-nm FPGA sales more than doubled sequentially, leading to FPGA growth of 18 percent year over year. The combination of solid top line growth, continued gross margin improvement, and lower than planned operating expense created significant operating leverage and a very strong operating margin.”

We love the company’s profitability numbers as well. It has a terrific profit margin of 23.7% and its operating margin is 26%. It’s ultra-high ROE of 28.3% shows management is being quite effective. The stock is attractively valued at 17x next year’s estimate of $1.30, which has risen four cents over the past month. This is in-line with the company’s long-term growth rate. We see the stock at $25 over the next six months.

Suggested Stop:$19.68