I took advantage of the market's early selloff today to buy shares of Majesco Entertainment (COOL). The company has been around for over a decade and produces games for a variety of hardware and software platforms. It is just entering the social gaming market with an important new partnership. The stock has a great risk/reward profile in my opinion and is a solid play for speculative investors.
"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." (Business description from Yahoo Finance)
7 reasons COOL has substantial upside from under $2 a share:
- The company just entered into a publishing agreement with Zynga Inc (ZNGA) for its latest social game, Mini Putt Park. The game will appear on Facebook (FB) and Zynga.com.
- The company has over $30mm in net cash (over 40% of market capitalization) on the balance sheet.
- The stock is selling at the bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.
- The stock is dirt cheap at under 5 times forward earnings (under 3 times if you strip out net cash).
- Operating cash flow growth has been strong the last few quarters and the stocks sells for just 5 times operating cash flow.
- The company has grown revenues at north of a 14% annual clip over the past five years. Analysts expect double digit sales growth in FY2012 as well. The sports a small five year projected PEG (.44) as well.
- The stock has good technical support at these levels (See Chart)