DISCLOSURE : Ive been buying CML stocks for the last 5 weeks.
Company: CML Microsystems - Current share price: £3.50
Industry: TECHNOLOGY | Sector: COMMUNICATIONS
Book value (NAV): £42.4m
Market cap: £59m @ £3.50 per share
Book-to-market value – Book value £42.4m to mkt cap £59m, 1.4x (strong)
-19/20 Turnover: £26.4m
-19/20 Profit/loss: £1.54m
Retained earnings: £30m | Dividend: 4p
REVENUE/TURNOVER GROWTH
1-yr revenue growth: (6.1%) fall in revenue
3-yr revenue growth: (16.5%) fall in revenue
5-yr revenue growth: 15.7% increase in revenue
-Potential growth forecast:-
5-yr revenue forecast: £30.5m**
10-yr revenue forecast: £35.4m
*This revenue forecast ‘COULD’ convert into a profit of around £4m, this could induce the share price to range between £5.10 and £5.60. I base this theory on CMLs 2018 numbers and that aligns with my 5-yr revenue forecast of £30.5m
(CMLs 18 revenue; £31.7m. Profit; £4.14m).
-Why I’m buying:-
Value, value and more value. The book value to market cap ratio is ridiculous and sells me straight away. CML serves a growing market and its products are ‘ahead of the curve’ when it comes to the global communications market, this provides potential growth and expansion. So to me, CML offers both value and growth. CML microsystems provides a regular dividend to its shareholders. The company holds £8.48m cash at bank and in hand, its current liabilities stand at £4.62m and its net cash position exceeds £30m. This is a strong position.
-Negative factors:-
Thinly traded stock with a large spread. Global trade tensions and data privacy concerns could be a potential risk for CML because governments are becoming more sensitive when it comes to global communications. This geopolitical risk could cut off CML products to certain international markets therefore it could suppress future potential growth.
-Holding period:- 5 to 8 years
-Note:-
CML microsystems serves the global communications market, which is a large high growth.