MarketGrader.com  provides Barrons.com with five stock picks every week. These are usually published every Wednesday at 6 am on the StockGrader section of Barrons.com.

Today we’re highlighting Brooks Automation (BRKS), which has staged a remarkable turnaround in its core operations in the last two years. We upgraded the stock to ‘BUY’ from ‘HOLD’ on November 11th and since then it has gained about 7%, not including today’s gain (stock opened up almost 2% this morning.)

The company’s fundamentals are strong across our four grade categories: Growth, Value, Profitability and Cash Flow. It’s quarterly revenue fell from $195 million in the first quarter of 2007 to $37 million during the same quarter in 2009, an abysmal 81% drop. Since bottoming out a year and a half ago its top line has recovered very nicely and last quarter reached again $182 million in sales, almost all the way back to its pre-recession high. Brooks Automation earned $24 million last quarter compared to a loss of $14.5 million a year earlier. It also generated $8.4 million in free cash flow last quarter and $24.4 million in the last 12 months. It now holds $108.8 million in cash on hand and has no debt.

The stock is trading at 9 times trailing 12 month earnings per share and 8 times forward EPS (also 12 months). Its market cap is only $543 million with only 3% of its float sold short. Most remarkably during this turnaround is the fact that the company managed to achieve it with very little dilution to existing shareholders. During the last quarter shareholders loss only 1 cent per share to dilution over a full year. Perhaps the Street has noticed the turnaround as evidenced by a dramatic jump in the stock’s MarketGrader.com Sentiment score from 3.5 in early November to the current level at 7.9. In our Top Down Analysis we have its sector (Information Technology) and its sub-industry (Semiconductor Equipment) both rated positively. Please click below for our report on the company.

MarketGrader.com’s latest report: BRKS.2010.12.08