The Singing Machine (SMDM) has moved back to profitability and is growing revenues and profits, but the stock price doesn’t reflect it yet. It has a market cap of only $7MM, but earned $1.4MM in profit last quarter alone. Net sales increased 90% year-over-year to $16.7MM for this quarter thanks to a strong Christmas. The company has over $3MM in cash with no debt, which is more than 7 cents per share. The company trades at 20 cents per share, and its trailing earnings are 5 cents over the last four quarters. Backing out the cash, this company is trading at 2.6 times trailing earnings (20-7)/5=2.6. Over the last 12 months SMDM has had $34.1MM in revenues, meaning the company is trading at 20.5% of revenues( 7/34.1=.205). Also, over the last 3 years, revenues have increased from $19.1MM in 2010 to $25.4MM in 2011, and $34.1MM in 2012.
Management said that they expect these impressive numbers to continue, as the company has added another big-box retailer to its distributors, as well as a 65% increase in sales off of its website. At 20 cents per share, this company is way undervalued. It is priced for no growth at all, but it is growing revenues, profits, and margins.
Don’t take my word for it; look through their financials and check out their website yourself.
The economy is turning around and this company is sitting at a multiple of 4 times trailing earnings. A few more similarly good reports to the last couple, and this stock will double. With these earnings, a double in the stock price only represents a P/E of less than 10, so this stock could triple or quadrouple over the next few years, and that would still only represent a P/E ratio of 12 or 15 when you add the cash on hand back in.
Over the last 4 years, annual revenue has grown from $21.3mm to $34.1mm. It is possible--since they are in more big-box retailers now--that revenue could be almost $50mm. This stock can double in the next two quarters and quadrupe by 2014 if that is the case (7 cents profit times a P/E of 12 is an 84 cent stock).