At $2.64 DSWL is trading for negative enterprise value (Cash on the balance sheet is more than the market cap plus long term debt). It's hard to imagine a "real" company priced cheaper than this one.
Management has done a good job at stabilizing gross margins over the last several quarters while sales have continued to fall. It looks like two of DSWL's top 3 customers, Digidesign and N&J Company, have dramatically decreased their orders in the last couple of years - only Vtech continues to be drive significant volume - and management has not been able to find new customers to fill the void.
I believe this company will continue to be a value trap until the market sees sales growth. The good news is that the company is break even at these very depressed sales levels and continues to spin off cash - albeit at the sacrifice of capital investments.
As a shareholder, I would like to hear more from management on what their plan is to start profitably growing the company again. The dividend and share buy back are great and I hope to see more, but the real catalyst for the stock price will be earnings growth.
Dtejd said a mouthful. Not all sales are profitable! When times are tough, as they are now, purchasing agents are prone to shop work to improve their costs. That's fair. But as we like to say, there are only so many ways to slice the bread. The laws of physics (machining, formability, etc) are not suspended in certain parts of the world. The time to make something is variable from company to company, but that variability has decreased over time. Deswell has good equipment, they know how to use it, and are assumed to be efficient. Finding profitable new work is just more difficult in tougher times. When good times return, and they will, Deswell is poised for significant growth. Hold for now, buy when/if they announce they have entered the medical implant segment.
Well of course, you're basically stating the obvious.
It's kind of hard to grow earnings when the global economy is in depression.
"Earnings growth" - any earnings would be nice, but I'm sure it's not that easy otherwise mgmt would have already done it. NTE has seen a pick up of orders hopefully DSWL will soon too. Frankly I've owned them since '09 so yes it has been frustrating to wait so long.