Sunday, February 21, 2010

Peering into Peerless

First, a warning: My subject is extremely thinly trade | Peerless Systems Corp. (PRLS)

(Click to make larger)

Second: I like this chart (weekly) as it has been building nicely and has cleared some volume by price points. It has pulled back on some lower volume, and a move may be in the offing with it consolidating here.

Third: I love the balance sheet. It is in my DNA to look at fundamentals--just a cursory view to see balance sheet strength/weakness. PRLS emerged from that view as a veritable stronghold. According to FINVIZ, PRLS has a book value of $3.16 and cash per share of $3.09. That's right--98% of it's book value is cash AND it's trading for less than the cash on the balance sheet at $2.62 per share.

Sales have taken a hit. I don't pretend to understand the fundamentals of its business (Per FINVIZ: "develops, licenses, and sells imaging and networking technologies and components to the digital document markets in the United States and Japan."). You can go here to see what Peerless says about its business.

In this trade (speculative!), I'm buying $3 cash for $2.60. If the company is burning through cash, then that cash per share gets jeopardized. I'm willing to take flier on this, and I entered a trade in my speculative account @ $2.58.

Position: Long as of 02/18/10--and reminding you of thin float.