I think this will stay around current prices until Q1 is released then this will get noticed I believe. Q1 will show year over year revenue growth for the first time in a while! This I believe will be the catalyst to lift this higher. The CEO stated this on the conference call:
"Based upon continuing strong order flow and a higher than expected order backlog we expect continuing sequential revenue growth in Q1. While our component supply is improving, we continue to have part shortages in the first quarter that may not be fully resolved until the second quarter. We would expect to have a substantial order backlog at the end of Q1."
Just with this statement revenues will be at least $51.2 million so profits should come in at least the same at .12. This would give revenues of over $100 million and .24 in earnings for the previous 2 quarters! Plus they will show year over year growth for the first time and they will be on a run rate of around .50 in earnings (that is with no more growth.... according to the CEO they are ramping up production for new customers). With a forward PE of 10 which is conservative you get my $5 target.
osubucks30
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There is a negative this is from the CEO:
"While we had substantial earnings improvements, we did not meet our goals with respect to cash generation in part due to timing issues. We expect this will be somewhat self correcting in Q1, however, inventory dynamics may take somewhat longer to correct. We used $3.1 million in cash from operations in the quarter. We recorded positive cash earnings of $3.4 million, however, working capital, excluding cash, increased by $6.5 million in the quarter driven by increased inventory and accounts receivables. Receivables increased due to higher revenue and significant customer payments due in the quarter that were not received until immediately subsequent to year end. Inventory is currently being impacted by component shortages as certain vendors are struggling to meet the increased demand across the industry. In addition, a newer customer converted production from consignment to turnkey resulting in SMTC taking ownership of approximately $3 million in inventory with an offsetting increase in accounts payable. As a result of working capital increases, net debt increased by $3.3 million to $24.1 million at the end of the quarter. Average debt also increased due to higher working capital levels. We expect debt to be reduced as working capital normalizes in the first half of 2010."
The next couple quarters should be interesting..... Even at $5 the company is worth only $75 million. I think if they can get the balance sheet cleaner over the next 2-3 quarters this will be a $8- $10 stock.
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