The market has recently had a number of both euphoric "up" days and pessimistic "down" days, as strong volatility has persisted over the last few months. Whether the market has risen or fallen, however, one stock that has consistently dropped is that of Meade Instruments (MEAD). Meade was already cheap on an asset basis, but has then dropped some 40% since August. Is it worth a purchase at its current price? You decide!
Meade now trades at a 63% discount to its net current assets. This includes $2.6 million of cash, $4 million (or about 2 months worth) of receivables and $7 million (or about a quarter's worth) of inventory. Meanwhile, the company has no debt, and trades for just $3.75 million.
To trade at such a large discount to current assets, you would expect Meade to be hemorrhaging cash, but it's not. The company broke even on a cash flow basis last year, and so far has used $2.45 million building up working capital (which happens every year at this time) as we have entered its prime selling season.
If you think this company is cheap, you're not alone among value investors. Paul Sonkin is on the Board as Hummingbird owns 15% of the company.
Meade has been beaten up in the market. As such, a margin of safety appears to be present, and not a lot has to go right for the company for this stock to experience large returns.
Disclosure: Author has a long position in shares of MEAD