September 24, 2008

GigaMedia Entering Value Territory

I love it when growth stocks become undervalued. Buying cheap growth is a great way to make big gains in a relatively small amount of time.

The Fool notes in this article that GigaMedia is down over 30% in the last 30 days and over 50% in the last 52 weeks. According to the article, GIGM is still a MF Global Gains and Rule Breakers pick. What happened?

Nothing significant as far as I can tell. Yes it is a Chinese stock, and most Chinese stocks have fallen out of favor (what hasn't lately). Headlines have gone from "GigaMedia climbs as 2Q profit beats analyst views" on August 12 to "GigaMedia Among 52 Week Lows" on September 15.

At the current price of $8 a share, the P/E sits at just over 11. The forward P/E (ending Dec. 31 2009) is just over 8.

There is also plenty of growth still ahead for the company. Analysts are expecting revenue growth estimates of 25%. GIGM still has plans for launching its sports betting venture in the fourth quarter of this year. The online role playing game Warhammer Online is set to launch this quarter, and if popular will be another catalyst for growth for this company.

Anything under $10 a share would be a great entry point into this stock. Get it cheap while you can.

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