Small Cap Stocks

Planar´s (PLNR) stock has sure made for an exciting investment gamble this year. After almost doubling our money in the stock earlier in the year, we´ve now given back nearly all our gains after today´s drop. However, despite the volatility and the loss of all our paper profits, we´re still holding onto the stock. The reason: We like the new, aggressive direction the company is headed in and we plan to hold on to see how this story plays out, even if it takes longer than expected for the company to reignite revenue and earnings growth.

Well, Planar (PLNR) came out with earnings this morning, that just blew me away. I wish I had more of this stock, but who knew how quickly this thing would turnaround. Maybe prior management was not all that bad.

Right after the close, Planar raised EPS guidance for the coming quarter to $0.08 to $0.10 per share. This is up from breakeven expectations a couple of months ago. The reason:

The change in expectations is primarily the result of higher than anticipated sales of higher margin EL and AMLCD display products to Industrial and Medical segments.

My back of the envelope valuation of PLNR, based on the current EPS guidance is at minimum $10 per share. This is based on $0.40 annualized EPS with a 15 multiple plus $4.10 per share in cash. It´s possible the stock moves even higher, if sales guidance and EPS estimates continue to improve in 2006. Hold on to this stock. If you want to read my original analysis of the stock, you can click here.

Planar´s (PLNR) 10K came out recently. I´m not sure why the stock has been weak recently. But, as is usually the case, the stock movement probably does not reflect at all on PLNR´s long-term prospects. In any case, here are two important tidbits from the 10K.

I believe that Planar Systems (PLNR) represents a good investment "gamble" at it´s current price of about $9.50. The company has low downside risk and significant upside should growth resume in the coming year or two.