February 28, 2011 PSW Staff |
further research. These stocks are undervalued relative to their peers and are exhibiting tremendous growth potential. These micro, small and mid cap stocks could easily double over the next three to six months given a continuation of favorable conditions. These are not the cheapest stocks on the block, but recent growth in results, stock price and projections could continue to bring volatility and upward momentum to these issues that are all still below $5. Level 3 Communications Inc. (LVLT)
despite being priced in the $1 range. The company has over 1.6 billion shares out, $600 million in cash and $6.5 billion in debt. A decade ago this company was worth $30 billion. Shares outstanding have more than quadrupled since then, and the stock has lost 99% of it's value as big competitors have caused this company to see some big losses. Many key things have remained relatively constant over this ten year period despite the value cut. Assets and liabilities have barely budged from being in check at around $8
extremely robust at $3.6 billion last year, towards the upper level of the $1.5 to $4.3 billion range we have seen during the ten year period. During more recent history, revenues have begun to swing to the upside, from a quarter over quarter basis. The company has not seen a positive earnings year in the past decade, but these losses have been shrinking, and the company is getting closer and closer to that profitability mark. With less than a $3 billion dollar market cap, and close to $4 billion a year in revenue, this stock is currently trading at less than 1/5th of it's enterprise value. Analysts are predicting continued top line growth in the coming quarters and years. What may not be included in those estimates are the company's position and leverage in the fast growing cloud computing space, as well as it's strength overseas. Hercules Offshore, Inc. (HERO) The Houston, Texas based owner of shallow water off shore drilling equipment has a lot of things going for it right now besides just a high oil price. A recent acquisition of assets including 20 drilling rigs from distressed Seahawk Drilling has made Hercules one of the worlds largest rig owners and operators. Meanwhile, a moratorium on drilling in the Gulf may be lifted sooner than many have thought, thanks to a recent federal court decision. This company has also had a history of losses, but is approaching profitability as well. The company will release financial results for the fourth quarter and 2010 year end in early March. This will begin to show some numbers from the SeaHawk fire sale, and the company's already solid looking balance sheet will improve further thanks to a supposed $100 million dollar purchase of $400 million in assets. Decreased competition and increased fire power may be a win-fall for this company when bans are lifted and especially if Oil prices remain strong. Opnext, Inc. (OPXT) Opnext, which focuses on a very high tech niche in the fiber optics space, has more than doubled in value over the last several weeks. The company has seen robust revenue growth over the past several years with things starting to accelerate over the last few quarters. The company brought in about $3.78 per share over the last twelve months, somewhere in the neighborhood of where the stock is currently trading. There seems to still be a lot of value in the stock, with 90 million shares outstanding and around $90 million in cash and a book value of $2.50. Revenue is expected to be north of $100 million per quarter for the foreseeable future, and the company is cutting expenses. Positive EBITDA and growth among all of it's product lines was seen last quarter and is expected to continue. This stock could likely trickle down a bit leading up to their next earnings release, and the company expects revenue between $97 million and $102 million, quite a bit higher than the $92.5 million expected by analysts. EMCORE Corporation (EMKR) Another player in the optical networking space, and similarly sized to Opnext is EMCORE, which brings with it exposure to the solar or photvoltaics markets as well as Fiber Optics. EMKR has also seen a skyrocketing in price over the past couple of weeks, a gain that comes close to, but not quite the 100+% that OPXT saw. Revenue growth for EMKR has not been as robust either, but margin improvements have been stellar. Gross margins, operating margins and net margins are all improving, and this company too is on the brink of profitability. No long term debt on the balance sheet means that the improved margins will allow increased spending on growing the business. The company has been cash flow positive in three out of the last four quarters. Glu Mobile, Inc. (GLUU) This stock has seen a steady climb from $1 six months ago to as high as $5 recently. During the last year, revenues have declined, but are stabilizing. The company is seeing substantial growth with some of it's new products, including it's social mobile game platform that seems to be gaining some major ground among the youth. The company says that it's products were downloaded and installed on smart phones and tablets 18 million times during the last quarter. A recently signed agreement with NVIDIA (NVDA) to develop games for the android market was announced at a recent consumer electronics show, which means they are now involved in both the android and iPhone app markets . Glu Mobile expects earnings to increase by 45.50% next year and 37.50% annually for the next 5 years. -This article continues for subscribers, and includes detailed trading strategy, risk analysis, buy, sell, stop loss, position weight and time horizon ideas. Sign up to our free weekly newsletter below and receive a free full access offer. |
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Analysis of listed, fully reporting penny stocks |
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