Two For Two on the Earnings Scoreboard - THC & COGT

Looks like a little willingness to take action on our Cogent Systems (NASDAQ: COGT) idea last weekend has paid off; the company did indeed post solid earnings last quarter. One of our older trading ideas - Tenet Healthcare (NYSE: THC) - also had a good quarter, pulling in considerably more than they had in the same quarter a year earlier. We'll look at both trades and their respective news below. 

Following that, SpongeTech Delivery Systems (OTCBB: SPNG) gave us a big announcement this morning - the marketing juggernaut is still on a roll. You'll find full details and an important web link to the latest marketing effort after we look at Tenet and Cogent. Here's a teaser in the meantime ....we're looking for SpongeTech's launch in this new segment to be greeted warmly. 
 

	Cogent on Track

A couple of Saturdays ago I mentioned Cogent Systems had topped analyst's earnings estimates for three straight quarters. These analysts may have finally gotten the message, as the company's per-share profit of 8 cents last quarter was finally right in line with expectations. The net result for shareholders was Friday's 6.8% jump in the stock's price. 

Assuming an entry price of $10.09 on Monday, our readers are now up about 10%....which isn't bad for a week's worth of work. 

In case you missed the initial recommendation, Cogent is one of those companies that's remained off the market's radar, partly due to size, and partly due to a lack of volatile earnings results. That's ok though - those slow and steady growers can often make for great investments. 

The market is looking for sales growth around 20% over the next couple of years for Cogent. Certainly do-able. And, earnings are getting incrementally better as well...37 cents per share over the past 12 months, a forecast of 52 cents for calendar 2008, and a profit of 55 cents per share in 2009. 

With an earnings projection of 55 cents, the current share price of $11.10 is very reasonable. And frankly, I think it may be a little too low. Why? Profit margins have been right around 36% for the last twelve months. A little sales growth could go a long way towards beefing up the bottom line. 

That's all conjecture though; the real interesting part was the $313 million cash the company's got banked. With a market cap of only $991 million, roughly a third of the stock's value is real and tangible. Plus, the remainder of the enterprise's value is a high-margin business. It just looked attractive, and so far it's paid off. 

As for the chart, normally a gap like we saw on Friday would concern me. And, maybe I should be concerned this time around too. I'm really not though. We've seen COGT leave plenty of unfilled gaps behind, both bullish and bearish. No big deal ...I actually expect to see this thing jump around as we wait to hit our target of $12.77. 
 

	Tenet Healthcare Getting Healthier

Our Tenet Healthcare pick is plenty seasoned, but this past week's results reflect why we picked it in the first place.

We weren't surprised to hear the company turned in a loss - we knew they were in the red from the onset. The reason we liked the stock was simply because the market had overdone the selling, which happened because the market overestimated just how tough things would be for this hospital network.

I blogged my thoughts in detail last week, but I can recap them here in only a few words - I feel Tenet is still on track to swing to a profit within the foreseeable future, and I still think Tenet is going to keep surprising the market. This was the third quarter in a row the company's earnings topped the initial estimates (with or without adjustments).

That said, these same analysts expect Tenet to turn a small profit in 2008, and a significant profit in 2009. 

That may be why the stock is 39% higher than in was when we first picked it in November. Makes sense. Remember, you buy a stock for where it's going - not for where it's been. Tenet looks like it's going to survive 2008s' challenges, and eventually come out ahead.

Of course, Id be kidding myself if I told you it wasn't reassuring to see the same clues from other hospitals. Lifepoint Hospitals (NASDAQ: LPNT) and Universal Health Services (NYSE: UHS) both topped earnings estimates recently. Lifepoint's numbers were particularly exciting - they doubled their quarterly profit and pumped up their forecast, significantly.

Not all the major hospitals are turning in stellar results, but enough of them have been to assure me that Tenet's improvements are not a mere accident.

So why did the stock sink a little in the early part of last week? Revised earnings estimates were a little bit higher than the original expectations, which means the number actually fell short of some guesses. (That was one of the key points of my blog/rant....do analysts really have the knowledge or the right to guess in the first place, and then move the bar midstream?)

I like the fact that the pullback was temporary though. I just feel investors realized what's actually going on with the company, and figured just because an analyst sees the glass as half empty doesn't mean it's not half full. 
 

	Dogs, Get Prepared For An Easier Bath

Technically the product has already been launched, but I get the feeling the surface has barely been scratched for SpongeTech's new pet bath sponge. Why?They're going to be advertised on national television, starting today. Two new commercials - a one minute and a two minute spot - will be airing on cable TV, and over the life of the campaign are expected to reach over 100 million homes.

If the success of their prior TV ad campaign is any indication, I'm looking for this round of marketing to have an even bigger impact. With the March/April ads they were focused on selling the car wash sponge, via (mostly) sports-related television network commercials seen by a market of abut 150 million viewers. And, it worked; that's basically where their early sales came from.

This time, the potential viewing market is slightly smaller. However, I don't have to tell you what kind of pet fanatics we've become here in the United States; the smaller market may actually be a more responsive market. 

Americans spent $41 billion (yes, that's billion with a 'b') on various pet supplies and products last year. While that's an insane number, it's also a monstrous opportunity. That's why I think the pet sponge may have a faster sell-through rate than the car wash sponge did. If SpongeTech can tap just 0.1% of that market, it would still translate into a $41 million prize.

The press release with a web-link to the two-minute version of the commercial is below.
 

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