Money Morning's oversold stock pick of the week is digital display maker Planar Systems Inc. (Nasdaq: PLNR).
Sometimes stocks get beaten down unfairly - but they're actually a great value. The share-price dip then gives investors an amazing entry point into a good long-term investment.
Money Morning Defense & Tech Specialist Michael Robinson likes Planar stock despite its recent downturn. He's convinced the 33% drop in PLNR stock over the past few months is just an overreaction to some minor bad news.
"Planar underscores a trend I've seen in this choppy market," Robinson said. "Even a hint of a slight decline in growth and Wall Street goes crazy."
Here's why the rush to dump Planar stock was premature...
First of all, it's worth noting that slowing growth for Planar is still pretty good growth. The forecast for the current quarter was for revenue growth of 23%. And the big digital displays that the company has focused on is thriving. That part of the business was up 57% year over year. Planar has positioned itself perfectly for this market, which researcher IHS says will grow 30% by 2017. As for the insider transactions, that wave of the selling happened last August. Since November there's been a wave of insider buying. CEO Gerald Perkel alone bought 172,156 shares of Planar stock in recent months. He clearly sees PLNR going higher. Now take a look at Planar's solid fundamentals. The forward price-to-earnings (P/E) ratio is just 10.08. And the P/E to growth (PEG) ratio is only 0.65. Anything less than 1.0 represents a discount from the stock's "fair value." The balance sheet is solid as well. PLNR holds $14.9 million in cash against just $161,000 in debt.
"I still very much believe in this company, its technology, and its management," Robinson said.
[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]
Planar stock closed Friday at $6.15. It's recovered a little of its losses since sinking to $5.33 on Feb. 25. It just got ahead of itself last year. Planar's projected earnings growth support a price higher than even the $8 one-year target. Planar is expected to earn $0.48 a share in 2015, which at the current P/E of 21.13 gives us a price of $10.14. That's a gain of 65%. And earnings for 2016 are projected to be $0.61. That will push PLNR stock past $12, even with a slightly lower P/E. At that point, you've doubled your money. Planar stock isn't likely to go much lower from here, so investors should buy all of their intended position now.
Another Great Buying Opportunity: Last week our oversold pick was careers website provider Dice Holdings Inc. (NYSE: DHX). Because two of its websites specialize in energy jobs, Dice fell victim to falling oil prices. But investors misread what's happening with Dice...
Follow me on Twitter @DavidGZeiler.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.