Toronto / NYSE
Recent Price: $0.38
Buy Opinion: 0.36 - 0.39
Short Term Sell Opinion: 0.47 - 0.57
Long Term Sell Opinion: 0.65 - 0.79
Here is a highly-risky, 38 cent penny stock pick. However, it is not a company that is new to us, nor to subscribers of Peter Leeds. In fact, it has repeatedly made our Quick Fix reports in former years where we select 10 penny stocks, all Undiscovered, Undervalued, and Under $1.
About 7 trading days ago, shares crashed from 50 cents to about 37 cents in a day. This fall was
based on their announcement of raising $3.7 million by issuing new shares.
Typically, to entice the larger corporate multi-million dollar investors, the offering needs to be at a discount to the current share price. In this case, it was 41 cents. Once the pricing terms are announced, the shares often fall towards that level, just as they did in this case.
MCZ was undervalued at 50 cents, and now at 38 cents reflects an even greater bargain.
MCZ is a great investment for U.S. and Canadian investors, since it trades in Toronto, and on the NYSE, making it easy to buy for all.
For fiscal 2014, they took a big hit in top line revenues (dropping from $123 million in 2013, to $94M). This washed out to a $7.8M loss.
After ongoing quarterly losses, their most recent 3 month period came out with a $1.5M profit. If they can maintain the current strength in operations, this may be the turning of the tide for Mad Catz.
The balance sheet is more than healthy enough, assuming they can keep the profits rolling. Current and total assets are $48M and $57M. Current and total liabilities are $44M and $45M - we'd like to see them tighten up their balance sheet, and the stock offering and improving results will make this happen.
It looks like they will be able to return to their winning ways, with a 145% increase in operating income for the recent quarter, which provided 2 cents per share in earnings, compared to a 1 cent loss in the previous year's period.
The biggest headwind for MCZ is the highly-competitive, rapidly-evolving gaming landscape, but cost reduction initiatives and commitments to growth in Asia are combining to position Mad Catz well for further improvements.
With a meagre $25M market cap, this tiny company may be one of the smallest with a NYSE listing. It also leaves them vulnerable as a takeover target, which would be a good event for shareholders in any regard.
MCZ is a company that has been around for years, and one which we have liked from time to time. This most recent price drop has positioned Mad Catz as a very compelling penny stock investment, which has actual earnings, known brands, customer loyalty, and great potential from current levels.
