Despite the market's recent record-breaking performance, there are still a handful of stocks that appear to be exceptionally cheap. These stocks have fallen below their net-net investment value. This was defined as being in bargain territory by the father of value investing, Benjamin Graham.
With that in mind, here are three stocks that currently appear to be sitting in the bargain bin. Keep in mind that this should only be considered a starting point for further research, as I have not conducted financial due diligence on each business. Just because a stock is cheap does not mean it's going to be a good investment. Many of these are small and micro-cap stocks, which are generally risky investments.
Richardson Electronics (RELL, Financial) provides engineered solutions, power grid and microwave tubes and related consumables. Over the past five years, the company has consistently reported net losses, although revenues have increased at a compound annual growth rate of 2.6%.
Although the company has reported losses in three out of the past five years, it has generated a positive operating cash flow from operations. In its 2020 financial year, the group generated a positive free cash flow per share of $0.01.
This cash generation, coupled with the group's strong balance sheet (net cash of $46 million at the end of fiscal 2020), has allowed it to maintain a dividend to investors despite losses. The stock supports an annual dividend per share of $0.24, giving a yield of 3.8% on the current stock price.
Based on the company's reported figures for the three months to the end of November 2020, it had total current assets of $129 million and total liabilities of $33 million, giving a net net asset value of $96 million. At the time of writing, the stock is trading with a market capitalization of just under $84 million.
The company has slipped in and out of profitability over the past five years. Over the period sales have increased by around 10%.
More importantly, however, the group has generated a positive operating cash flow from operations every year since 2015. This has helped fund the business and support its balance sheet.
According to TAT's latest financial figures, which cover the three months to the end of September 2020, the company has $24 million of cash and short-term investments. Total current assets amounted to $81 million, and total assets came in at $112 million. Total liabilities at the end of the period were $30 million. That suggests a net net asset value of $51 million compared to the current market capitalization of $49 million.
Nova LifeStyle Inc
Nova LifeStyle Inc (NVFY, Financial) is a designer and marketer of contemporary styled residential and commercial furniture. With a $16 million market capitalization, this is the smallest company in this article. Like its peers above, Nova has been losing money in the past few years. However, it has been generating cash.
For fiscal 2019 the group reported free cash flow per share from operations of $2.60. On a trailing 12-month basis, this figure stands at $1.
The business also has a robust balance sheet. For the quarter ended September 2020, Nova had $9.4 million of cash on the balance sheet.
Total current assets were $59 million compared to total liabilities of just $5.9 million. These figures suggest a net net value of $53 million compared to Nova's current market capitalization of around $16 million.
Including all of the company's long-term assets, the stock is trading at a price to tangible book value ratio of just 0.3, with book value standing at approximately $10 per share.
Disclosure: The author owns no share mentioned.
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