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 (NASDAQ: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 (OTC:SSNLF) 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).
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIMG over the next 72 hours.