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  • Fresh Entries Into Established Markets 0 comments
    Jul 3, 2013 11:24 AM | about stocks: GLUU, OME

    New companies entering into established markets often bring a great deal of energy and innovative ideas with them and can topple establish players on these fronts. Glu Mobile Inc (NASDAQ: GLUU) and Omega Protein Corporation (NYSE: OME) are such new entities foraying into markets where leading players are well entrenched.

    Glu Mobile is a gaming company with a focus on developing games for mobile and handheld devices. Fortunes in the gaming industry are largely dependent on a number of popular games and not just one. With its portfolio of games such as the Big Time Gangsta, Blood & Glory, Bug Village, and Contract Killer, Glu Mobile has enough experience to develop more popular games. This is not exactly a new company but the transition to smartphones and tablets is relatively a new move. The company is not profitable but it is likely to make profits next year. At 40 times its forward earnings, the stock is not inexpensive but the downside also appears to be capped given that it is already trading at near to its 52-week low rates. The company's business is based on "freemium" model of offering a limited version of game for free and charging for full version, but it has recently made some changes to its monetization strategy to increase sales. These efforts will most likely quicken the break even, feel the analysts at Northland Securities, which have a price target of $4.5 for the stock.

    Texas based nutritional ingredient company, Omega Protein Corporation , has successfully made inroads in this highly competitive business. In the most recent quarter, it reported a 19 percent jump in sales while profits grew more than 50 percent to $2.85 million. Gross margin stood at 24.7 percent for the quarter, up from 21.6 percent in the 2012 first quarter. With a market capitalization of just $195 million, Omega Protein is still a small-cap stock,, but the company is gradually going mainstream. A look at the fundamentals reveals it is a well positioned stock. At current market price of $9.8, it trades at a 7 percent discount to its book value of $10.5 while price by sales ratio is also conservative at 0.8. At 39.2 times its trailing 12 months earnings, it may be a bargain, but earnings visibility is quite high which reduces forward price earnings ratio to 9.9. A relaxed debt equity ratio of 0.15 will also contribute to its margins and earnings in future.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: GLUU, OME
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