I recently came across a stock called Methode Electronics (MEI) that has a lot of qualities I love to find in a small cap stock. Among these are a solid dividend yield, cheap valuations and recent insider buying.
"Methode Electronics engages in the design, manufacture, and marketing of components and subsystem devices worldwide." (Business description from Yahoo Finance)
7 reasons Methode offers solid value at under $9 a share:
- The company has a solid balance sheet with around $38 million in net cash (approximately 1/8 of market capitalization).
- Several insiders bought 10,000 new shares so far in July.
- Earnings are ramping up. The company made 22 cents a share in FY2011. Analysts have it making 52 cents a share in FY2012 and99 cents a share in FY2013.
- The stock yields a solid 3.3%.
- The company looks like it will grow revenues around 10% in FY2012 and over 20% in FY2013, and the stock sports a very reasonable five year projected PEG (.99) for a three percent yielder.
- MEI is priced at 8.9 times forward earnings, a deep discount to its historical average (28.9).
- The stock looks like it has bottomed off longer term technical support, has some momentum and recently crossed its 200 day moving average (see chart).