Wednesday, November 7, 2007

DFNS AT .53!!!

You can buy DFNS for .53 as of this writing!!

Too me that just seems like a good deal. I have bought more in my IRA last week at a bit higher prices but at these levels I am going to try and buy some more for my regular account at .53. (I just bought an additional 1500 shares. I know have over 17,000 shares 8000 of which are for the stockdoubling account.)

If they have a breakeven quarter this stock goes down to around .40 which is .13 down. I can't foresee them losing money but if they did I guess they would go down a little more than that.

Even if they only do .01 for the quarter that means they have roughly .045 EPS for the year. Assume they only do .01 for Q4 and that is .055 for the year. At 10x PE you have a .55 stock.

I think of course they will do much better then that I think the earnings could look in the area of .07 for the year. Which if they do its at least a .70 stock minimum. That is .17 higher then current prices.

Also DFNS at .40 and 29 million shares outstanding would put the market cap at roughly $11.6 million. Well unless the revenues just fell something tremendous they should do in the area of $17-18 million for the year. That would mean that they would be trading at roughly .68 price to sales ratio. It should be trading more like 1.5 or so. A .40 stock would mean less than 2x Price to book ratio. And like I said roughly 10x PE ratio for the year.

In other words unless the wheels just totally came off this stock I don't see a lot of downside potential in this stock. And any downside potential I would think would be quickly brought back up to these current levels based on sales growth.

The company hasn't said anything negative at all. Actually been positive with their comments they see sales growth continuing.

It stinks to be in a dead money stock. I wouldn't quite consider DFNS as such but it has been sitting in the .50-.60 range for a while now.

If DFNS did $17 million for the year and had a 1.5 price to sales ratio this stock would be at .88. At those prices it is roughly a 4x Price to book. And if they do earn in the .07 range for the year that roughly a 12-13x PE ratio for a company that grew 60% for the year. Those are reasonable evaluations especially if the grow continues even at 30% for next year.

No I don't think DFNS is a $1.50 stock by any means but I don't think its a .40 stock either.

Hopefully the company comes out with a press release on new orders before Q3. And hopefully Q3 is .015-.02 in earnings.

Have a great trading day.
Steve Hoven

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