Here's an update to my previous Cryptologic (CRYP) recommendation ("Cryptologic is way underpriced"). Jim Gillies of The Motley Fool agrees, saying Cryptologic is undervalued (pegging its fair value at $26 using a conservative DCF model), continues to grow very strongly, and has gobs of cash on hand even after trying to get rid of some of it. So how did Cryptologic give away cash and yet now have more on hand? Besides free cashflow, they also win from a stock buyback at $15 (the stock is now at $20). Here's how The Motley Fool explains it:
CryptoLogic has long been a tremendous cash generator -- a nice problem to have. At the end of 2004, the balance sheet housed $86 million in cash and equivalents. After spending $2.1 million in dividends, $3.3 million on the special investment program, $7.6 million on regular capital spending, and $8.9 million on bargain-priced shares, there remains ... $88.5 million in cash and equivalents year to date. Perhaps it should come as no surprise that management raised the dividend again to $0.28 a share, or 1.3% annually. Those who took the opportunity to buy at the shares' sub-$15 nadir are getting nearly 2% on their money.
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