Looking Forward: WTSLA, SYMM, OFI

Trends, Charts and Exclusive Opinion

Looking Forward: Forecasts, Guidance, Goals Boost 3 SmallCaps

WTSLA: Rides U.S. Jan Retail Sales Jump of 2.5%; 5th Straight Increase

SYMM: 5-Month ‘Steady as She Goes’ Pricing Level Attracts Buyers

OFI: “Our goal is to substantially pay down our remaining debt...”

Gaining 5.43% this morning is Wet Seal Inc., (WTSLA) http://www.wetseal.com/ currently trading in the $3.70 range. WTSLA is a very, very heavily traded SmallCap with a 3-Month average daily trading volume of 1,094,060 shares. Very liquid. WTSLA is widely held by institutions and has a 52-week high of $4.60 set on 05-06-09. WTSLA has trailing twelve month revenues of $564+ million and a positive, twelve month diluted EPS of $0.18 during the ‘great recession’. WTSLA was at $2.50 in March and rose as high as 4.60 by early May; the stock dropped and has spent the last 7-months trading between $3-4. Over a half-billion in revenues and a plus EPS during the retail sectors worst time in memory; I’ll take it at this price. WTSLA is a short-term (6 Mo) ‘Buy’ consideration for me.

January retail sales were up 2.5% according to Thomson Reuters today and that is the 5^th consecutive month of increases. After a simply awful year for retailers, WTSLA has more than held its own. And though challenged and challenged again, the teen clothing outlet has not only managed to stay afloat, sure- even with some bottom-line trimming, but has managed to return a profit to shareholders over the last 12-Months.     

Today, WTSLA said a key sales measurement fell in January (stores open at least one year decreased 3.7%), but the Company raised its profit forecast for the fourth quarter. WTSLA said total revenue fell 2.5% to $30.9 million in January. That included $25.8 million from Wet Seal brand stores, down 3.9% and $5.1 million from Arden B stores, a gain of 5.4%. January 30 was the end of WTSLAs Q4 and management said its revenue fell 2.5% to $151 million over that quarter.

WTSLA also raised its profit forecast, saying profit margins were stronger than expected. The Company now expects a profit of 8 cents to 9 cents per share for the quarter, up from 6 cents to 7 cents per share. WTSLA runs 504 stores in 47 states, Washington, D.C., and Puerto Rico.

Gaining 5.67% this morning is S&P SmallCap 600 company Symmetricom Inc., (SYMM) http://www.symmetricom.com/ currently trading in the $5.59 range. SYMM has a 3-Month average daily trading volume of 119.635 shares. SYMM has a 52-week high of $6.59 set on 08-03-09 (an approximate $1 spread from its current price). SYMM has trailing twelve month revenues of $217+ million and is widely held by institutions. SYMM was $2.50 in March and made a very steady climb to $6.50 in Aug. It dropped to the $5 range in the latter half of Aug and has set $5 as its 5-month floor. This is one of the steadiest SmallCap stocks I can recall in recent memory, and that’s the ‘story’ with this stock. Considering its last two quarters have been profitable for shareholders, SYMM is a long-term (1 Yr) ‘Buy’ consideration for me.

Yesterday, SYMM reported Q2 2010 net revenue from continuing operations of $56.9 million, up 19% over the prior year period and GAPP net earnings from continuing operations of $1.9 million, or $0.04 per share. Non-GAAP earnings from continuing operations were $4.3 million, or $0.10 per share. SYMM management noted it has a free cash flow of $2.6 million. SYMM is primarily a supplier of precise time and frequency technologies and has put its video Quality of Experience business on the chopping block. Good move; stick with what you know. “I am pleased with our results for the second quarter as our revenues, earnings and cash flow were all up from the prior year period,” said the SYMM CEO.

SYMM management also issued some guidance for Q3 2010 expecting net revenues to be in the $55-62 million range with GAPP EPS to be in the 2-8 cent range and Non-GAPP EPS to be in the 9-14 cent range. SYMM helped define the world’s time and frequency standards, delivering precision, reliability and efficiency to wireline and wireless networks and its technologies are deployed in more than 90 countries.

Gaining as much as 15% on 120k shares traded this morning is Overhill Farms Inc., (OFI) http://www.overhillfarms.com/ currently trading in the $5.06 range. OFI has a 52-week high on $6.60 set on 10-21-09. OFI has trailing twelve month revenues of $209+ million and a positive, corresponding diluted EPS of $0.51. OFI is widely held by institutions. There are some short-sellers of OFI and their downward pressure could be the result of its drop since Nov. The shorters ratio of the public float isn’t too high, but if OFI can move back towards its high (posting gains like today), they will begin to cover themselves and encourage an increase in valuation. OFI at its current price is a ‘Buy on the Dips’ consideration for me in the near-term. I believe in the next three months it will return to its high and set a current range floor of over $5. Here’s why:  

Today, the Vernon-based food processor for Jenny Craig, Inc., Safeway Inc., Panda Restaurant Group, Inc., H. J. Heinz Company, and American Airlines reported net income of $3.1 million, or $0.19 diluted EPS on net revenues of $56.2 million for Q1 2010. That’s a 20.5% EPS increase y-o-y. OFI Chairman and CEO James Rudis also noted, “Based on our strong results, we were able to make a voluntary debt prepayment of $5 million during the period, ending the quarter with cash of $4.9 million. Assuming continued strong performance, our goal is to substantially pay down our remaining debt by the end of the calendar year, which would enable us to consider a number of alternatives for further enhancing stockholder value.”

OFI reported in Dec for the fiscal year ended September 27, 2009, its net revenues were $209.9 million with net income of $8.3 million or $0.52 diluted EPS vs. net revenues of $238.8 million, and net income of $10.3 million or $0.65 per diluted EPS for the year ended September 28, 2008. Strong, very strong numbers through the recession.

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