Speculative fever is creeping back into the market after five months of being in rally mode. I am cautious here, but as long as the "risk on" lever is down; I will take a shot with a small portion of my portfolio into speculative plays. Here are two microcap stocks selling at around $2.50 a share that look like they have good prospects ahead of them and have low valuations.
Century Casinos (CNTY):
Century Casinos, Inc. operates as an international casino entertainment company in the United States and internationally. The company owns and operates the Century Casino & Hotel Cripple Creek in Cripple Creek; the Century Casino Calgary in Alberta, Canada; the Century Casino & Hotel in Central City, Colorado; and the Century Casino & Hotel in Edmonton, Canada. It also operates ship-based casinos aboard, including the Silver Cloud, the Mein Schiff, and three Oceania Cruise ships. (Business Description from Yahoo Finance)
4 reasons Century Casinos has value at $2.50 a share:
- The company has a solid balance sheet with approximately 20% of its market capitalization in net cash.
- The stock is in a long term bottoming process. In addition, this stock was over $11 a share five years ago (see chart).
- The stock is dirt cheap at 55 percent of book value and just 8 times cash flow
- After breaking even in FY2010, CNTY is expected to make 12 cents a share in FY2011 and is projected at 17 cents a share in FY2012. Insiders own 20% of the company and have done little selling (less than $15,000 worth) over the last two years.
Majesco Entertainment Company (COOL):
Majesco Entertainment Company develops and markets video game products primarily for family oriented, mass-market consumers primarily in the United States, Europe, and the PAL territories. The company publishes video games for various interactive entertainment hardware platforms, including Nintendo's DS, DSi, and Wii; Sony's PlayStation 3 and PlayStation Portable; Microsoft's Xbox 360; and personal computers. (Business Description from Yahoo Finance)
4 reasons COOL is a buy at $2.60 a share:
- The stock has a low five year projected PEG (.49) and sells for less than 7.5 times forward earnings. The median analysts' price target on COOL is $4.
- Given the company rapid EPS growth over the past five years (more than 70% annually) and low market capitalization, company could be an easy acquisition for larger player in the space.
- It is selling in the bottom third of its five year valuation range based on P/E, P/CF, P/S and P/B.
- It has a solid balance sheet with around 15% of its market capitalization in net cash and insiders are hanging tight (Sold only 2% of their shares over previous six months).
Disclosure: I am long CNTY.