CHEAP OR UNDERVALUED?

NSTC

This might be one of my key weaknesses: I tend to be attracted to those broads that are fundamentally cheap, and technically unsound. NSTC is definitely one of them. It is dirt cheap for no obvious reasons. The company is traded at 14X of E05 and less than 10X of E06, while growing at well over 20%, both top and bottom lines. It has a clean balance sheet with more than $3.0/sh in cash. The earnings appear to be safe as the company reaffirm its earnings outlook as recently as Q1/05. It is unlikely by now that it would miss its Q2 guidance as it would have warned by now. What are the risks? I know, I know, it is an Israel based company, a bit of unstable, you might say; The sector is not exactly on fire, but which one is (other than fuel). Competition is fierce, so are most of other sectors. Moreover, doesn’t that it is growing at a fast clip in a fierce competitive environment says a lot of its competence? There are a lot of doubts about its ability to manage its acquisitions, but what are the bases of those doubts? Has the company failed to deliver? I can’t see the downside risk below $9.0, while upside could be as high as $15.