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 Systems: About the Company
Three employees of Tektronix, Inc. founded Planar Systems Inc. in 1983 in Beaverton, Ore. PLNR became a publicly traded stock in 1993. Since it started, Planar has bought more than half a dozen businesses to broaden its offerings and acquire new display technologies. Planar has focused on high-end commercial displays such as public signage. It also makes rear-projection cubes, touchscreens, and desktop monitors. The company serves a diverse group of markets, including medical, space, security, transportation, retail, and government. Planar operates globally with offices in Asia and Europe as well as North America. PLNR has a market cap of $139 million. The company employs about 300 people.
Planar Stock: Why It's Oversold
Planar stock had an incredible run last year. By Dec. 29, it had soared nearly 145%. So when PLNR stock started to slide, much of the selling probably was due to profit-taking. There was also concern over a report that Planar insiders had sold 31% of their stock. But the situation got worse on Feb. 4 after the company reported earnings. Planar beat expectations on income. But the company had a slight miss on revenue even though it grew 38% year over year. And perhaps of most concern to Wall Street, Planar forecast slower growth in its guidance. That was enough to knock 17% off PLNR stock in one day. A stock downgrade that same day from Zacks Investment Research from "outperform" to "neutral" was not helpful.
"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...
Why PLNR Stock Is a Buy
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.
Investing in Planar Systems Stock (Nasdaq: PLNR)
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...
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
