7 Reasons This Cash Rich $7 Small Cap Stock Is A Buy

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 |  About: PCTEL, Inc. (PCTI)
by: Bret Jensen

The small cap space can provide some of the market's best bargains. Small caps are underfollowed and the amount of data available is much less than the mid and large cap sectors. During research this weekend (The rain in Miami cancelled my planned golf outing), I came across this gem.

PCTEL, Inc. (NASDAQ:PCTI) - "PCTEL, Inc. provides propagation and optimization solutions for the wireless industry. It designs and develops software-based radios (scanning receivers) for wireless network optimization; and develops and distributes antenna solutions". (Business Description from Yahoo Finance)

7 reasons PCTI has is a bargain at just $7 a share:
 

  • Over 50% of the company's market capitalization is represented by net cash on its balance sheet.
  • The stock is selling for less than book value (99%). It also yields 1.7%.
  • Only three analysts cover the stock. Their price targets range from $9 to $10 a share.
  • Earnings are expected to increase 50% over the next two years. PCTEL made 33 cents a share in EPS in FY2011. Analysts expect 39 cents in FY2012 and 51 cents in FY2013.
  • Revenue growth is expected to be robust over the next few years as well as predictions are for an average of 11% to 12% sales growth annually through FY2013.
  • If you strip out cash, the stock is selling for about 6 ½ times forward earnings. Pretty cheap considering the growth in earnings and revenues expected over the next two years.
  • The stock appears to have bottomed at just under $6 a share and recently re-crossed its 200 day moving average (See Chart).

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PCTI over the next 72 hours.