Will Planar Shares Keep Rallying?

While this is a small cap stock, and knowing that small cap stocks with low share prices can rally much faster than traditional Dow Jones Industrial Average stocks, a 28% gain in two trading sessions might make most investors wonder if things have reversed too fast.

Late last week, the official analyst opinion from Roth Capital was that Planar could have more room to run. The firm raised its formal rating to Buy from Neutral. Roth also assigned a $5.50 price target. The call here was that Planar was trading at only 5.5 times the firm’s expected count on adjusted EBITDA per share.

Planar had a net loss of $0.01 per share on a GAAP basis, but the company posted positive earnings when using the non-GAAP count used by most Wall Street analysts. Planar also said that its Digital Signage product sales were up a sharp 19% to $25.3 million, representing some 60% of the company’s total revenue. That drove the non-GAAP gross profit up 7% to $11.4 million — to 26.9% of revenue. That led to a non-GAAP net income of $503,000 or $0.02 per share.

Guidance was also positive here. Fiscal 2015 was shown by management to remain on track with significant profit improvement. The company talked up Digital Signage revenue, but also noted for beyond 2015 that its expanding product portfolio and strong sales pipeline would keep driving further improvement in fiscal 2016. Guidance was as follows:

Given the company’s current orders and sales pipeline, management expects fiscal fourth quarter 2015 revenue to be between $49 million and $51 million, and non-GAAP net income is expected to range between $0.10 and $0.12 per diluted share. For the full fiscal year 2015, revenue is expected to be between $196 million and $198 million, which would represent an increase of 10% to 11% compared to fiscal 2014. Non-GAAP net income for fiscal 2015 is expected to range between $0.37 and $0.39 per diluted share, which would represent an increase of 37% to 44% compared to $0.27 per diluted share in fiscal 2014.

It is almost without a doubt that the world wants to keep going more and more digital and visual. All that will lead to more and more business for Planar.

Again, small cap stocks with low-priced shares can just run much higher and faster than established Dow stocks. This has all the makings of one of those runways that active traders and swing traders love.

Even after a 28% gain in two sessions to $4.80, the market cap here is $108 million and the 52-week range is $3.02 to $9.17. Roth’s target price of $5.50 still sounds high, but the boutique B. Riley raised its rating to Buy from Neutral back in June — with a $6.00 price target, versus $4.11 at the time.

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