Strong Insider Buying Could Mean The Bottom Is In For This Undervalued $4 Stock

Jun.14.12 | About: ShoreTel, Inc. (SHOR)

Shoretel (NASDAQ:SHOR) like many small cap stocks have had a very rough couple of months in the market. The challenges/guidance of one of largest competitors, Polycom (NASDAQ:PLCM), have not helped sentiment on the company either. Finally, the company gets an "Israel" discount. However, there have been several positive catalysts over the last month that gives me confidence that the bottom is close at hand for these undervalued shares.

Positive catalysts for Shoretel

  • Insiders stepped up to buy approximately 150,000 net shares in the company during May. This comes on top of their purchases earlier in the year.
  • The company is gaining market share and is the fastest-growing player in the U.S. enterprise IP telephony markets
  • The company continues to add partners to its reselling channel, recently announcing another with Versatile Communications.

"Shoretel together with its subsidiaries, engages in the development and sale of Internet protocol communications systems for enterprises in the United States and internationally." (Business description from Yahoo Finance)

4 reasons SHOR is a solid value play at under $4 a share:

  • It has a solid balance sheet with approximately 15% of its market capitalization represented by net cash on the balance sheet.
  • The company has not beat earnings estimates for five straight quarters as analysts consistently underestimate the company's strength in a tough environment.
  • The Eight analysts that cover the stock have a median price target of $8 a share on SHOR, more than twice its current price.
  • The stock has long term technical support at current price levels (See Chart)

Click to enlarge

Disclosure: I am long SHOR.