One of my favorite strategies is to find cheap stocks with improving fundamentals and technicals that have just crossed over the $5 a share demarcation point. I have found that these stocks can rocket up from that point as institutions come in (most institutions do not buy stocks under $5 a share) and push the shares up. I constantly screen to find these opportunities. One stock that just met these criteria is Silicon Image (SIMG).
"Silicon Image provides wireless and wired connectivity solutions that enable the distribution and presentation of high-definition content for mobile, consumer electronics, and personal computer markets." (Business description from Yahoo Finance)
Seven reasons SIMG is a bargain at just over $5 a share:
- The company has almost $150mm (One third of market capitalization) in net cash on its balance sheet.
- The company is a supplier to Samsung (SSNLF.PK) Galaxy phones which are selling extremely well.
- Analysts are expected almost 20% revenue growth in FY2012 and 15% sales increases in FY2013. The stock sports a small five year projected PEG (.53) as well.
- The company has beat earnings estimates five of the last six quarters. The average beat over consensus over the last four quarters has averaged 25%.
- SIMG is selling at 12 times forward earnings (8 times if you subtract cash), a deep discount to its five year average (29.2).
- The mean analysts' price target on the stock is just under $8 a share. Price targets range from $6.50 to $12 a share. The stock was initiated as a "Buy" at Dougherty & Co. in late June. An insider also just purchased $25K worth of shares last week.
- The stock has bounced off long term technical support and just crossed over its 200 day moving average (See Chart).