The Singing Machine (SMDM) has a market cap of only $7MM, but earned $1.4MM in profit last quarter alone. Net sales increased 90% 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.
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. Even if the stock increases by 30%, that would only bring the P/E ratio to 4. This company is growing, but the market is pricing it as if there will be contraction instead.