Do your own research prior to making any investment decisions. I and/or my family/friends own the stock mentioned in this article.
KEMET Corporation (KEM) manufactures and sells solid tantalum and multilayer ceramic capacitors (stuff used in electronics). These products are used in communication systems, data processors, PCs, and for military/aerospace purposes.
KEM is trading at a price of $2.70 with a market capitalization of ~$219m (as of 7:30am 9/1/10). As you could see from a chart it has enjoyed one hell of a run from its approximate bottom of $0.08/share in March 2009 to its current price of $2.70. UNFORTUNATELY I can't say I've been along for that ride. However the name still presents, in my opinion, immense value at this level.
I see there being two strong supporting reasons for owning this name. The first is based on straight valuation. KEM's trading at $219m market cap against a book value of ~$254m. This represents a nearly 16% discount. The firm also enjoys strong liquidity with a quick ratio of 1.6 and debt-to-assets of only 37%. In this environment having liquidity and debt control at these levels is a huge advantage.
The second reason to own the name is for the earnings potential. Trailing twelve months EBITDA was ~$101m which puts KEM trading at less than 2.5x TTM EBITDA. The quarterly EBITDA has been increasing steadily over those four quarters from $9.16m to $22.2m to $25.4m to the most recent quarter's $45.2m. Capex remains manageable but growing from ~$2m four quarters ago to ~$7m in the MRQ. Gross revenue in the MRQ was 24.9% which was a large increase over the prior quarter's 20.2%. Operating income has been steadily rising on a quarter-over-quarter basis as well (-$1.57m, $8.45m, $11.96m, and the MRQ of $30.66m). The most recent quarter experienced a non-operating loss of $42m, which, when excluded, allowed KEM to actually earn $20m on the quarter.
Factoring in the valuation, the recent price reaction, the lack of institutional support (for now), and the quarter-over-quarter continuing improvements I don't see how one would not view this is a great value play.
BWS Financial has also released a report putting an $8 12-month price target.
Disclosure: I and/or my family/friends own shares