This Company has Enough Cash to Buyback ALL of its Stock. And Still have Money Left Over

And they just started a buyback program to remove almost 11% of their outstanding stock from circulation

At first glance, you see nothing more than a mediocre company struggling to make a profit and in search of direction. Run any of the typical value screens based on earnings or profits, and you will immediately discard this stock from your watchlist. Indeed, many investors have done precisely so.

3 analysts follow this stock, they all rate this a Strong Buy. The lowest target price of the stock is more than 50% higher than the current market price.

But investors do not care.

There are very good reasons why this stock is underappreciated. We will examine these reasons first.

Then, I will lay out a powerful argument for why astute investors like you and me should care.

Why is this Stock Underappreciated?

1. Sales has declined 10.5% in the past year and is projected to decline 51% next year

2. The company has been unprofitable in 2022, 2023, and now in 2024 (continuing operations)

3. The company is in the middle of moving its production from Singapore to Thailand, intended to reduce costs, but is currently duplicating many costs while the transition is not yet complete.

4. The company is making a pivot to new products and markets and this will require investment. They expect around $15 million cash burn in 2025

Here is Why I Think Astute Investors Should Pay Attention

1. The company recently sold a line of business and now has $145 million in cash and cash equivalents. The sales next year will not have the contribution of this business unit, and this explains why future sales projection is a decline of 51%

2. The company has no short or long-term debt

3. The company’s market value is $93 million, 36% below its cash holdings.

4. The company recently instituted a $10 million stock buyback program, which will buyback over 10% of its outstanding stock

5. With its cash hoard, the company has sufficient capital to invest in new products, pursue new markets, and fund the expected cash burn, and the stock will still be undervalued at the current level

6. The movement of production from Singapore to Thailand is targeted to complete in early 2025, and when it does, a lot of extra expenses and cash burn will disappear

7. Chuck Royce, of Royce Investment Partners, has been quietly buying the stock and now owns 5.85% of the company. Royce is an activist value investor in small-cap companies.

Today the stock is cheap and unknown. Within a quarter, they will release their annual report for 2024 which will include about $99.5 million gain from the sale of their line of business and will show a significant increase in the GAAP EPS from 2023 numbers. We all know this is a one-time event, but it will cause new investors to take note and people will figure out the cash hoard. I expect that the stock will not be an unknown stock by the time their Q1 ends.

Let me tell you about this company and its stock.