Sigma Designs, Inc. (SIGM)

Hard to catch a falling knife, but I really don't understand why this stock has fallen as much as it has. I can only assume that it is unloved and unfollowed on Wall Street, slipping between the cracks of most analysts reports. That's not entirely true either as there are 12 analysts following this company. So, maybe they know something I don't...

According to Yahoo! Finance, the company has almost 50% of its stock price in cash-on-hand and an astoundingly low PEG ratio of 0.30. That screams bargain to me, but let's dig further. Profit & Operating Margins are both double-digit at 31.7% and 25.9%. RoA and RoE are equally good at 15.7% and 35.2%. Growth in Quarterly Revenue and Earnings are 144.6% and 660.5%, respectively (although I doubt that last number). They have ZERO debt (always a good thing to see!), a fantastic Current Ratio of 9.1, a stunning Book Value of 11.5, and insider ownership of 4.4%. The only negatives I see here are high volatility in its Beta, and a marginally negative cash flow (probably due to last quarters numbers).

True, the company disappointed in January 2008, but before that it had 3 quarters of double-digit positive surprises. So what, it happened to fall short of analysts expectations by a mere 3.6% in EPS last quarter? Gimme a break. The stock has been beaten up pretty good. To me, it looks like there's much more upside potential than downside loss. But I've been wrong before and will continue to be wrong, especially when trying to call a bottom and catch a falling knife... Still, like a moth to the flame, this one looks bright to me. (I'm keeping my Time Frame fairly short so I'll remember to check in on this one in the next few months to see if they've corrected their revenue problems.)