What a turnaround at Meade, and not in a good way. When Meade was brought up on this site as a potential value investment just over a year ago, its net cash position matched its market cap while its cash flow was positive. Since then, its market cap has fallen, while its cash position has fallen even more. As of its latest report a few days ago, Meade's cash position is now just $670K, down from $5 million 1.5 years ago, putting this company's future in doubt.
At the heart of the company's problems appear to be a product transition that is poorly executed. New product delays have resulted in unfilled orders, leaving the company with lower revenues and yet all the expenses associated with launching a new product. For a company with a strong balance sheet, a new product delay could simply be a temporary blip on the road to future success; but for Meade, the cash position has now dwindled significantly, while the company's line of credit is rather small and at the mercy of its lender.
The company's latest financials describe the situation about one month and a half ago. Unfortunately, it appears as though Meade's execution issues appear to continue to plague the company even a month and a half into the new quarter. Try to order the company's new LX800 and LX600 product lines online, and it's clear the products are not available (backorder and pre-order, respectively).
I have tried to talk to major shareholder and director of this company Paul Sonkin, who follows me on Twitter. But he refuses to discuss the company, citing his directorship.
I also inquired about the LX800 at my local Meade dealer (as provided by Meade's website), only to have the store's staff push me towards more "reliable" competitor products. When I continued to ask about the Meade products, I was told there are software issues that need to be debugged, and that the store is hesitant to order and promote these products until the problems are solved. Considering Meade's bloated inventories and weak cash position, this isn't a good sign.
Thanks to Meade's worsening financial situation, Meade moves from the Stock Ideas list to the dubious Value Fail page. That's not to say the company can't find a way out of its current mess. But for value investors who seek downside protection, this stock may no longer qualify; thanks to the company's missteps, downside risk has increased tremendously in the last few months, even as the share price has fallen!
Disclosure: No position