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  • Small Cap Play: CRUS

    This week’s play is Cirrus Logic Inc. (NASDAQ:  CRUS).  Cirrus develops high-precision analog and mixed-signal integrated circuits for the audio and energy markets.  The company’s largest customer is Apple Inc., providing it with audio processing chips for the iPod, iPhone, and iPad.  The company has approximately 1,000 patents for more than 700 products, and serves around 2,500 customers across the globe.

    Last month, the company was ranked as one of the top 50 best Small and Medium Work Places in America by Great Place to Work Institute.  This list was published in Entrepreneur magazine.  Hopefully, this means that the company should be able to retain its engineers and top employees.  Forbes also ranked Cirrus #34 on its Top 100 Best Small Companies list.  This is Forbes’ annual ranking of the best-performing public companies with under $1 billion in annual revenues.

    About half of the company’s net income is driven through its relationship with Apple.  This does pose a larger risk, and I added that into my consideration when calculating the required rate of return.  However, it appears that this business relationship is still strong, and Cirrus products are still in the new Apple products.  As the company expands its product lines in the energy markets and outside its Apple related products, the percentage of net income from Apple should fall overtime.

    A review of the financial statements shows that this company is in good financial health.  With attractive multiples (even with the risks factored in) and a current market price below the intrinsic price calculated by my valuation models, I believe CRUS looks attractive below $16 a share. 

    Disclosure: I have no positions in any stocks mentioned, and do not intended on initiating a long or short position over the next 72 hours.

    Disclaimer: As with any investment, due diligence is required. The opinions in this article are not intended to be used to make a particular investment or follow a particular strategy.

    Tags: CRUS
    Nov 21 11:22 PM | Link | Comment!
  • Small Cap Play: DHX

    First off, I apologize for not posting a report last week.  I will try to post a blog weekly, but sometimes I am unable to get to the computer on Monday nights. 

    The company that I am reviewing this week is Dice Holdings (NYSE:  DHX).  The company, through its subsidiaries, runs a few websites that provide specialized career development services.  Please do not confused Dice with the video game company that goes by the same name, the two companies are not related.  The company operates in three segments:  Tech & Clearance, Finance, and Energy.  The websites that these segments operate are listed below:

    Tech & Clearance: Dice.com & clearancejobs.com

    Finance:  eFinancialCareers.com

    Energy:  WorldWideWorker.com & Rigzone.com

    Other Websites: AllHealthCareJobs.com & TargetedJobFairs.com

    Of all the websites in their portfolio, Dice.com and eFinancialCareers.com are their strongest assets.  For the third quarter of 2011, revenue grew 36% YOY.  This was driven by 31% revenue growth at Dice.com and 29% revenue growth at eFinancialCareers.com. 

    I have personally used eFinancialCareers.com and I am impressed with the quality of the website and search results.  Compared to other major job search engines, eFinancialCareers.com does a great job filtering out postings that are not related to your line of work.  If you type in “Research Analyst” into indeed.com, you will get research analyst positions not only in finance, but also in healthcare, academia, manufacturing, etc.  By going to a website that focuses on a particular industry, the user has a more enjoyable experience due to the better search results.

    Now we can look at the valuation.  Dice is currently trading at a forward P/E of 13.4 and a PEG of 0.70.  Using a five year DCF model with a growth rate of 20%, discount rate of 17%, and terminal growth of 3% (conservative in my opinion), I arrive at an intrinsic price of $11.21.  Another one of my proprietary models says that with current market conditions, intrinsic price is $9.50.  Either way, at $8.29, the company is trading below its intrinsic value.

    I would label this as a growth company and not recommend it if you are looking for a value play.  As with any small-cap company that conducts its business by running websites, constant monitoring will be necessary if you decide to become a shareholder of Dice.

    Please comment below and tell me what you think of DHX.

    Disclosure: I have no positions in any stocks mentioned, and do not intended on initiating a long or short position over the next 72 hours.

    Disclaimer: As with any investment, due diligence is required. The opinions in this article are not intended to be used to make a particular investment or follow a particular strategy.

    Tags: DHX
    Nov 14 9:30 PM | Link | Comment!
  • Small Cap Play: JJSF

    J & J Snack Foods (NASDAQ:  JJSF) manufactures, markets, and distributes snack foods and beverages to the food service and retail supermarket industries.  Some of their name brands include ICEE, SuperPretzel, Mrs. GoodCookie, Bavarian Pretzel, Country Home Bakery, Luigi’s Italian Ice, Slush Puppie, and several other well-known brands.

    The company has a very strong balance sheet with a current ratio above 3 and a LT-Debt/Equity ratio below 0.1.  J & J also has one of the most consistent earnings track records I have seen in a while.  It has increased earnings for nine out of the last ten years, and is 10/10 when it comes to increasing revenues.  Many investment gurus, including Warren Buffett, love to see companies with this type of track record.

    At its current market price, I believe J & J is fairly valued.  Companies that consistently increase their earnings like J & J tend to rarely be mispriced.  However, consistent earners can be attractive takeover targets.  With recent consolidation in the snack food market, this could become a possibility in the future.  I am not one to speculate on takeovers, nor do I recommend companies based solely on the possibility of a takeover, but it is a small point to consider.

    You could initiate a small position in the company at this time.  I believe there is very little downside at this valuation level.  Any further drop below $50 could provide an even more attractive buying opportunity and if technical analysis of this stock is correct, there could be a temporary pullback that could send the price below $50.  However, like I stated earlier, I do think that the company is fairly valued at its current price.  Therefore, do not worry if the company temporarily dips, but also do not expect the company to rise at a quick rate.  This is a long-term small cap play, and J & J should continue to grow at a faster rate than the market as a whole over the next few years.

    Please comment on the post to discuss what you think about JJSF.

    Disclosure: I have no positions in any stocks mentioned, and do not intended on initiating a long position over the next 72 hours.

    Disclaimer: As with any investment, due diligence is required. The opinions in this article are not intended to be used to make a particular investment or follow a particular strategy.

    Tags: JJSF
    Oct 31 9:53 PM | Link | 1 Comment
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