Rada Games
Ltd. (RADA) produces and sells electronic entertainment devices.
Key
Information:
Fundamental:
Sector:
Consumer Goods
Industry:
Toys & Games
Liquidity:
Market
Capitalization: $172.65 Million
Average daily
volume (3-month): 20 Thousand Shares
Closing Stock
Price: $9.058
Risk
Proxies:
52-week high /
52-week low: 1.27
Beta
(3-month): 0.46
Debt/Equity: 0
Profitable:
Yes
Valuation:
Price/Sales:
1.05
Price/Book:
1.75
Price/Earnings:
16.90
Price/2006
Analyst Earnings Estimates: 8.23
Fundamental
Analysis
Overview
Based on our
analysis of valuations and growth rates, we believe Rada Games Ltd. to be
undervalued.
Long-Term
Growth
RADA has grown
sales at a 5-year average rate of 8.24%, much higher than the industry average
of -0.10%.
Recent
Growth
Revenues for
Q4 2005 came in 5% above revenues for Q4 2004. Revenues for the FY came
in 38% above revenues for the prior year. EPS for FY 2005 was $0.54, up
from $0.18 in FY 2004.
The strong
recent revenue and EPS growth is a substantially positive signal for the
stock. It is also a positive that the recent growth rates are higher than
the long-term growth rates.
Insider
Transactions
There have
been no recent insider transactions.
Institutional
Transactions
Recent institutional
transactions have been positive. With approximately 400,000 shares traded
in total, net buying was 64,000 shares.
Shares Sold
Short
Roughly 30% of
the outstanding shares were sold short as of the 10th of
November. A sharp rise (the stock is already up more than 10%) or more
strong earnings numbers may prompt short-sellers to cover their
positions. If this happens, the rise could be quite sharp; there are 4
million shares sold short, and the average daily volume is just over 500
thousand shares.
Analyst
Forecasts
The analyst
covering RADA forecasts 2006 EPS of $1.00, and 2007 EPS of $1.10.
He rates the stock as a strong buy, and has a $13.00 price target.
We view the
high earnings expectations, positive rating, and high target estimate as
bullish for the stock.
Valuations
RADA trades with low valuations. The stock currently trades
with a forward P/E ratio of only 8.23. In consideration of the strong
recent growth rates and the strong balance sheet (no debt, and $2.79/share in
cash) we believe that this P/E ratio is much too low.
Technical
Analysis
Our technical
analysis indicators are neutral for RADA.
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Key
Levels
Buy:
Slowly
We are
fundamentally bullish on the stock. However, it is quite thinly
traded. If you wish to buy the stock, please do not place buy orders
aggressively; other people may do so in reaction to this article, and it will
lead to you receiving a poor transaction price. Be patient for a good
price. We are bullish on the stock, but have no reason to believe that
all the gains are going to come in the next week!
Target:
Until fundamentals change
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