I've done enough research, looked at articles on the company in the trade press for the last two years, and looked at the financials enough to take a position.
As Bob, Robert, or you noted, the downside here is limited - the book value is $3.50 a share and the company is making money and apparently will continue to grow. Read some management statements and articles stating that they expect some of the new products introduced in the last six months to add to revenue and eps growth rate.
In any event, downside is limited, upside potential very good, limited risk.
What would be a fair value for the stock now? Assuming a growth rate of 20% (well below what analysts are predicting) we should support of PE of 20 (for a growth/PE ratio of 1). The lowest earnings estimate of the four analysts who cover for this fiscal year is 43 cents, so we can assume they will make 40 cents (lower than any analyst) - and the year is more than half over. 20 x .40 = $8 a share conservative fair value. Today we can buy the stock at a 25% discount to these conservative numbers.
If you believe the forecasts, possibly we could be looking at 45 cents this year, and using a multiple of 30 can get to $14 - a double on this years earnings. And of course, if earnings grow the stock price will do well over the next few years.
Then again, never believe the analyst numbers. Thanks again everyone for the analysis and information, I have a feeling I'll be stopping by here frequently.
Best - Joe |
