Costar (CSTI) is an off-the-radar stock that I think is one of the better opportunities out there right now. A summary of my current thoughts are:
- They made $1.77/share in 2014 vs. a stock price of $14 which gives it a trailing PE of roughly 8 which is inexpensive. Also, there were some one-time costs due to the acquisition of Cohu. So, it is even a bit better than that.
- They made $0.16/share in Q4'14 vs a loss of $0.12/share in Q4'13 which is a significant improvement. Part of that is due to the different seasonal pattern of Cohu. I suspect that people aren't paying attention to the Q4 report because it is their seasonally slowest quarter. Earnings of $0.16/share for a $14 stock doesn't sound impressive unless you know that it is seasonally very slow.
- The Cohu acquisition should add more to the bottom line in 2015. They will have the benefit of the full year of Cohu plus they have cross selling opportunities.
- They are in a growing market where a rising tide will lift all boats. Having said that, I expect that their Walmart business will be a bit lower this year. Overall, top line will grow especially because of having a full year of Cohu business.
- Their Q4 press release was optimistic. It stated: "We look to maintain the momentum of 2014 by expanding our footprint with our existing customer base through our increasingly broad product line."
- I'm thinking that EPS for 2015 will be in the $1.75-$2.00 range with a chance to be as high as $2.50. They do have a tough EPS comp for Q1 as they made $0.74 last year.
- I believe there is a good chance that they become an SEC filer this year.
- They have a nice balance sheet with a book value of $8.78.
- Overall, I think it is likely that the stock is somewhere in the $20's later this year with a possibility of seeing the high $20's if the stars align.
