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Finding value in a market in the midst of an extended (I would say overextended) rally is getting more difficult. I have started to look at stocks that have not participated in this rally for possible investments. Super Micro Computer (NASDAQ:SMCI) has been hard hit since mid-July when it reported earnings and gave guidance that came in slightly lower than the consensus range. However, the company has good growth prospects, valuation is relatively cheap and the stock is currently at technical support levels. It seems like a good place to start to accumulate a position in these beaten down shares.

"Super Micro Computer develops and provides high performance server solutions based on modular and open-standard architecture." (Business description from Yahoo Finance)

Six reasons to pick up SMCI at $12 a share:
 

  1. Analysts expect double digit revenue growth for both FY2012 and FY2013. The stock sports a five year projected PEG of under 1 (.83).
  2. The median price target of the four analysts that cover the stock is $18 a share, some 50% above its current price.
  3. The stock is selling near the bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.
  4. Investors are getting an opportunity to pick up these temporarily beaten down shares on the cheap. The company has grown revenues and earnings at a better than 19% and 13% annual rate respectfully over the past five years.
  5. The stock is selling at just under 10 times forward earnings, a discount to its five year average (12.9).
  6. The stock has longer term technical support at these levels (See chart).

(click to enlarge)

Source: It Could Be A 'Super' Time To Pick Up This Beaten-Down $12 Tech Stock