Meade Instruments Corp (MEAD) is a RISKY 1- 1/2 year potential turnaround
Pros
For the current value of 2.7 million, shareholders receive “valuable brand names and intellectual property that provides MEAD a competitive advantage in the marketplace”. The Coronado brand name has a unique niche in the area of solar astronomy. 7.4 million in sales for the most recent quarter with a 17% gross profit margin.
Solid balance sheet with per share data as follows: EV = $2.39 ($2,789,130), Price = $2.50(2,917,500), Sales = $6.51, Cash = $2.07, AR = $5.17, Inventory = $7.47, Total Liabilities = $5.03
Cons:
Losing money at a current run rate of 1.1 million per quarter based on the recent results. The company expects to continue losing money over the remaining fiscal year. The most recent financial results reported a GP margin of 17%. Sales would need to increase ~ 80% to just break even. Most of the value micro cap institutions have bailed over the past year.
So having said this It was encouraging that “the Company currently anticipates that cash on hand and funds generated from operations, including cost saving measures the Company has taken and additional measures it could still take, will be sufficient to meet the Company’s anticipated cash requirements during fiscal 2010.
The company needs to be sold or dramatically reduce expenses to support the current annual sales of about 28 million.
Time will tell over the next 16 – 24 months.
I own shares of MEAD but realize this idea has a high probability of failing.
