I screened with Finviz for companies that trade with a P/E ratio of less than 5 and checked if the companies had any insider buys during the last three months. I chose to check the insider buys to narrow the list and to add more confidence that these stocks could be good picks now. The low P/E shows that the companies have great earnings power relative to their market cap. Here is a look at five companies that I found:
Aware (AWRE) is a leading software and technology supplier for the biometrics, telecommunications, and healthcare industries. Aware's biometrics software products and services are provided to solution vendors and system integrators for use by government agencies toward applications including border management, secure credentials, law enforcement, and national defense. Aware's DSL Service Assurance Group offers test and diagnostics software products that enable broadband service providers to manage their DSL networks. Aware also provides standards-based medical imaging software products to the healthcare industry.
John Stafford purchased 16,300 shares on May 21 and currently holds 2,120,598 shares of the company. The company has 22.1 million shares outstanding which makes John Stafford a 9.5% owner of the company. John Stafford serves as a director of the company.
The company reported the second-quarter financial results on July 26, with the following highlights:
|Net income||$2.49 per share|
|Cash per share||$4.6|
Net income in the second quarter of 2012 included a net gain of $71.2 million from the sale of patent assets.
Kevin Russell, Aware's co-chief executive officer and general counsel, said,
We are pleased to report that this is our fourth consecutive profitable quarter on an operating and net income basis. Net income of $54.9 million this quarter was driven by our closing a significant sale of patent assets for $75 million. We also continue to be encouraged by growth opportunities in our operating businesses.
The stock has a $9 price target from the Point and Figure chart. The stock is trading currently at a P/E ratio of 2.12 P/E. The future earnings are most likely lower due to the one-time income item in the second quarter. The company has net cash of $4.6 per share and is currently trading at a share price of $5.6. The insiders have only been buying the shares. There are no insider sells since at least July 2008. There are no analysts following this company. I would recommend buying the shares around the net cash level of $4.6 per share.
With over 400 store locations, Casual Male Retail Group (CMRG) is the largest specialty retailer of big and tall men's apparel, with retail operations in the United States and London, England and direct businesses throughout the United States, Canada, and Europe. Casual Male Retail Group Inc. operates, through its subsidiaries, under the trade names of DestinationXL, Casual MaleXL, Casual MaleXL Outlets, Rochester Clothing, B&T Factory Direct, Shoes XL and Living XL.
Seymour Holtzman has purchased 154,036 shares this year with the latest transaction in June 2012. Seymour Holtzman currently holds 4,351,222 shares of the company. The company has 48.5 million shares outstanding, which makes Seymour Holtzman a 9.1% owner of the company. Seymour Holtzman serves also as a director of the company.
The company reported first-quarter financial results on May 18, with the following highlights:
|Net income||$0.05 per share|
Fiscal 2012 outlook
For the fiscal year ending February 2, 2013, the company's outlook is unchanged from previous guidance, inclusive of the opening of 35 DXL stores:
- Comparable sales increase of 4.7% to 6.6% and total sales of $416.5 million to $423.9 million. This sales increase is driven by the expansion of the DXL stores and continued growth in its direct business.
- Gross profit margin of 46.8% to 47.2%.
- SG&A expenses to increase by a range of $6.0 million to $7.4 million, primarily due to the 53rd week in fiscal 2012. On a comparable 52-week period, SG&A costs are expected to increase by a range of $3.5 million to $5.0 million.
- Tax provision to return to a normal tax rate of approximately 40%, compared with an effective income tax rate of 10% in fiscal 2011 due to the reversal of substantially all of the company's valuation allowance in fiscal 2011.
- Diluted earnings per share of $0.22-$0.27 per diluted share. This is compared to fiscal 2011 earnings per share of $0.89 per diluted share, or after adjusting for non-recurring items and normal tax rate, adjusted earnings per share of $0.19 per diluted share. (See Non-GAAP Measures and related table for a complete reconciliation of non-GAAP adjusted earnings per share).
- Free cash flow of approximately $10.0 million, which is based on operating cash flow of approximately $45.0 million and capital expenditures of approximately $35.0 million.
The stock has seen more insider buying than selling since May 2010. Fiscal year 2011 earnings were $0.89 per share but the current 2012 fiscal year's earnings are expected to be only $0.22-$0.27 per share. The company will report the second-quarter financial results on August 17. I am not currently planning to take a position in this stock.
Full House Resorts (FLL) owns, develops and manages gaming facilities. The company owns the Rising Star Casino Resort in Rising Sun, Indiana. The Rising Star Riverboat Casino has 40,000 square feet of gaming space with almost 1,300 slot and video poker machines and 37 table games. The property includes a 190-room hotel, a pavilion with five food and beverage outlets, an 18-hole Scottish links golf course and a large, multi-purpose Grand Theater for concerts and performance events as well as meetings and conventions. In addition, Full House owns Stockman's Casino in Fallon, Nevada, which has 8,400 square feet of gaming space with approximately 260 gaming machines, four table games and a keno game. The company also operates the Grand Lodge Casino at the Hyatt Regency Lake Tahoe Resort, Spa and Casino in Incline Village, Nevada, on the north shore of Lake Tahoe under a five-year lease agreement with the Hyatt organization.
The company also has a management agreement with the Pueblo of Pojoaque for the operations of the Buffalo Thunder Casino and Resort in Santa Fe, New Mexico, along with the Pueblo's Cities of Gold and Sports Bar casino facilities.
- Wesley Elam purchased 3,000 shares on July 16 and currently holds 112,035 shares of the company. Wesley Elam serves as a Sr. Vice President of Operations and Project Management.
- Mark Miller purchased 2,000 shares on July 13 and currently holds 452,296 shares of the company. Mark Miller serves as Chief Operating Officer, Chief Financial Officer and Director of the company.
The company reported the second-quarter financial results on August 9 with the following highlights:
|Net income||$0.7 million|
Andre Hilliou, Chairman and CEO of Full House Resorts commented at the second quarter earnings call:
The second quarter was the first full quarter that we operated without our FireKeepers Casino management agreement. Last quarter, we completed the sale of our 50% interest in GEM and FireKeepers management agreement for $48.75 million plus a wind-up fee of $1.24M, and used a portion of the proceeds to retire all of our outstanding debt.
All in for the quarter, we generated adjusted EBITDA of $2.9 million compared to $6.1 million in the prior-year period.
The stock has a $5.75 price target from the Point and Figure chart. It looks like this year's earnings will be below the 2011 earnings. The stock has not seen any insider sells since March 2011. The stock has a book value of $4.18 per share, which could act as the first target for the stock. I have no plans to buy the stock currently.
hhgregg (HGG) is a leading specialty retailer of premium video products, brand name appliances, audio products and accessories. hhgregg offers a comprehensive selection of digital televisions and appliances, which are sold at competitive prices. hhgregg says it focuses on providing its customers with a superior purchase experience from the time they first enter the stores to the delivery and installation of products in their homes. hhgregg says it distinguishes itself from its competitors by employing an extensively trained, commissioned sales force that serves its customers with a consultative and educational sales approach. hhgregg operates 212 stores in Alabama, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Mississippi, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia.
The company reported the first-quarter (ending June 30) fiscal year 2013 financial results with the following highlights:
|Net loss||$0.16 per share|
|Shares outstanding||36.1 million|
Consistent with the company's pre-release on July 10, 2012, the company expects net income per diluted share will be within a range of $0.90 to $1.05 for fiscal 2013.
Included in the company's guidance are the following annual assumptions:
- fiscal 2013 comparable-store sales of negative 6% to negative 4%
- fiscal 2013 net sales increase of 3% to 6%
- 20 to 22 new store openings in fiscal 2013
- the impact of fiscal first quarter share repurchase activity of 1.1 million shares at a cost of $11.2 million
Jeremy Aguilar, Chief Financial Officer commented,
Though our industries have been challenged over the past several years, we have consistently maintained a solid liquidity position, with no long-term debt. Despite a volatile sales environment, we have been able to manage our inventory very well and are pleased with our current inventory levels. We continue to remain focused on driving long-term shareholder value while maintaining a strong liquidity position.
August's insider buy was the first since September 2010. The stock has seen quite heavy insider selling since November 2010. The stock has a forward P/E of 6.55 currently. The stock has a $3 price target from the Point and Figure chart. I am not planning to take any positions in the stock currently.
Handy & Harman (HNH) is a diversified manufacturer of engineered niche industrial products with leading market positions in many of the markets it serves. Through its operating subsidiaries, HNH focuses on high margin products and innovative technology and serves customers across a wide range of end markets. HNH's diverse product offerings are marketed throughout the United States and internationally.
- Dgt Holdings Corporation has purchased 69,433 shares this year with the latest buy in August. The shares were purchased via a Rule 10b5-1 and Rule 10b-18 Trading Plan.
- Sph Group Holdings LLC has purchased 134,681 shares this year and currently holds 7,131,185 shares of the company. The company has 13.1 million shares outstanding which makes Sph Group a 54.2% owner of Handy & Harman.
The company reported the second-quarter financial results on August 9, with the following highlights:
|Net income||$0.83 per share|
|Shares outstanding||13.1 million|
HNH previously provided its outlook for full-year 2012 sales and Adjusted EBITDA in the range of $635 million to $776 million and $77 million to $94 million, respectively. HNH's outlook for the third quarter of 2012, based on current information, is for sales between $156 million and $191 million and Adjusted EBITDA between $20 million and $25 million.
The stock has not seen any insider sells since at least February 2010, but has seen plenty of insider buying. The stock has a $9 price target from the Point and Figure chart. If the target price will be reached I might take a long position in the stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.