The market didn’t take to kindly to PeakStocks.com portfolio recommendation AuthenTec’s (Nasdaq: AUTH) latest earnings release, sending shares precipitously lower in the days following what were largely stellar earnings from a rapidly expanding up-and-coming company.

The good news for us, is that this presents us an excellent opportunity to add shares of AuthenTec at discounted prices and further cost average our total position.

If you haven’t already, it’s time to put some money to work in shares of AuthenTec.

I don’t know when shares will stop their recent slide to new all-time lows, but one thing I am certain of: AuthenTec is a cutting edge company that continues to execute in an otherwise wickedly negative marketplace and in the face of continued consumer doldrums.

Very briefly, AuthenTec is the world’s leading provider of fingerprint sensors and solutions to the wireless, PC and Access Control markets.

I am initiating the Fifth (5) BUY recommendation of AuthenTec at or around $7.50 per share.

Here’s Why:

New to the AuthenTec story?

Click here to read my complete AuthenTec research report and buy recommendation

• Or read my update on AuthenTec’s latest stellar earnings here.

Time to Ride This Gravy Train

Continued Execution, With an All-Time Low Stock Price Make AuthenTec Shares Ripe for the Picking.

Not only can we get shares of AuthenTec far below their IPO price of $11.00 per share, but we also are getting one more year of operating results and profits to boot, whih has in turn made shares of AuthenTec much more reasonably priced as the company has further grown into its valuation.

The following are my reasons for recommending another purchase in AuthenTec right away:

• Stock Price: We’ll start with the obvious one. AuthenTec went public last year at $11.00 per share.

Since that time, they have met or beaten analyst’s earnings estimates every single quarter as a public company, become profitable for an entire year, and have now become cash flow positive in 2 out of the last 3 quarters, all the while increasing sales 50% year over year, AND expanding their gross and operating margins significantly.

At these levels, AuthenTec represents a bargain price for a company growing this fast, with increasing profits in this sort of economic downturn where most technology companies are facing severe headwinds.

• Valuation: You won’t get me to say that AuthenTec is dirt cheap, hopefully, it will never be, but with the recent decline, it has become what one would call a “fair” or reasonably valued company.

Remember that it is always better to buy an excellent company for a good price, then a good company for an excellent price.

High growth stocks like AuthenTec will never be “cheap” by any stretch of the imagination because they are growing so fast and deserve a premium, but within that bookmark, shares of AuthenTec are looking incredibly cheap, even for a fast growing company.

Some quick hits:

1. Current P/E based on 2008 earnings of $.18 per share: 40.61
2. Forward P/E based on 2009 earnings of $.42 per share: 17.41
3. Projected 5-year EPS growth rate: 32.5%
4. Current PEG based on 2008 earnings: 1.25
5. Current PEG based on 2009 earnings: .54
6. Using my Discounted Cash Flow model, I get a price range of: $8-10 per share
7. AuthenTec’s margins, growth,etc. are all higher than most companies in their peer group and industry.

I won’t go into excruciating detail on every single valuation metric, but if you look at how fast AuthenTec is projected to grow this year (45.5%) and next year’s sales (34.3%), on top of their expected Earnings Per Share growth of 133% into 2009, it’s not hard to justify that a company like this deserves a much higher premium and they aren’t getting it.

I have always been willing to pay more for AuthenTec than you might otherwise for any other company because of its growth prospects and proven track record.

The nice part with today’s valuation is that now you don’t have to really pay any premium at all!

• Continued Company Execution: I wrote about this in much more depth in my last post concerning AuthenTec’s latest quarter.

Aside from a few blips in terms of their Average Selling Price (ASP) declining because of some one-time items and continued cost reductions, and a bump in their inventory in order to serve their rapidly expanding sales to new customers, there was little there that would alarm any investor, especially in light of the fact that AuthenTec has never missed earnings, and has often raised both top and bottom line numbers over the last year.

Everything that management has set out to do and accomplish, they have done, including launching 3 new fingerprint sensors, a new product packaging called TouchStone that enables AuthenTec’s sensors to be integrated into waterproof products and be more durable, and other enhancements including great margin expansion, and profits, all point to a business that is firing on all cylinders, even in spite of current economic forces.

You can read my complete company analysis from AuthenTec’s last earnings conference call here.

Bottom Line

Don’t be afraid of current market conditions!

While we can never predict bottoms, my cost-averaging approach to purchasing shares on PeakStocks.com has allowed us to get into AuthenTec at bargain prices while being patient for a turnaround in the overall market, and specifically, for a catalyst with this particular company.

I advise you to buy shares immediately, even if it is only your first position, and add to that position on anything below this level.

Remember, AuthenTec came public at $11 per share.

I never thought we would have the opportunity to purchase shares at or near these levels ever!

This might be one of the last times you’ll get that chance, don’t let it pass you by.

• Click here to read my complete AuthenTec research report and buy recommendation
• Or read my update on AuthenTec’s latest stellar earnings here.

*Variables You Should Know About AuthenTec (Nasdaq: AUTH)
Current Recommendation:	STRONG BUY
The Company:	AuthenTec, Inc., is a fabless mixed-signal semiconductor company that provides fingerprint authentication sensors and solutions to the high-volume personal computer (PC), wireless device, and access control markets.
Why Buy Now:	Proprietary and Patented Technology Low-Cost Advantage Continuous Technological Innovation Huge Growth In an Expanding and Rapidly Developing Market CEO Founder With Sizable Stake in Company Strong Relationships With Leading Global PC and Wireless Device Manufacturers Addressable market of over 1 Billion units per year New Company on the Precipice of Fundamental Breakout Fantastic Stock Price, around IPO level High Margin Business Multiple Revenue Streams
Market Cap:	$206.9
Revenue (TTM):	$58.60
Cash/Debt:	$67 / $0
Current Price:	$7.50
Risk Rating (?):	7.5 (Moderate-High)
Position Size (?):	1/4 (12-17-07), 1/4 (1-17-08), 1/4 (1-23-08), 1/4 (7-3-08), 1/4 (8-4-08)
Buy Around Price (?):	$13.50 (12-17-07), $13.25 (1-17-08), $12.00 (1-23-08), $10.00 (7-3-08), $7.50 (8-4-08)

*As of 8-1-08. Except share price, all values in millions.

View original at: PeakStocks.com

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