Heska Corp. (HSKA)

I was disappointed with the quarterly results of HSKA, and I exited early in the mornings. My concern is the very weak top-line growth, despite the seasonal factors. This remains a very speculative stock and if it could not maintain higher level of growth rate (at least double digits), I do not feel comfortable to hold it anymore.

With the proceeds, I added some CSCO and PAYX. I did not add CSCO before the earnings, because I did not want to take on the earning risk. While I missed a buck and half, I felt more comfortable to hold it here. My target for CSCO is $30 for the next 12 months, a very modest target.

PAYX delivered a strong quarter, increased its dividends, and re-affirmed its guidance, but the stock did not move at all. Part of it is its relatively high multiples (25X of FY07 EPS). However, I believe it is more appropriate to valuate PAYX with its FY08 EPS, which I believe will bring down its multiple to 20X level, a reasonable level for an extremely consistently performer, with about 15X EPS growth, not to mention about 2% of dividend yield.

Position: HSKA: none; Long CSCO, PAYX