Astro-Med Inc. demands a cautious posture

Feb 8th, 2013 – Comment

It appears that all the good news has been baked into this cake and that at this time it has risen as much as the ingredients will allow.


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Hey Lou,

I was wondering what do you have to say about Astro-Med. I recently bought it because it seemed like a profitable stock. I just want a second opinion on it.

Thanks.

Harsumeet

Hey Harsumeet,

Thanks for the assignment. Astro-Med Inc. (ALOT NASDAQ) operates two units. Astro-Med Test & Measurement which creates systems that acquire, process, analyze, and present data. QuickLabel Systems provides end users with label printing solutions.  The research that I have conducted on your behalf confirms that ALOT has been reporting steady increases in revenue, growing profits, and consistent dividend distributions over the last several years. However there are other factors that you need to keep in mind with regards to this stock.

ALOT has a market capitalization of $75.8 million making it micro cap which by definition increases the risk profile. Smaller companies don’t have the market power that larger competitors enjoy making them more vulnerable. The trading volume is light with average daily volume over the last 3 months coming in at 10,973 shares. The stock has traded below average volume in 15 of the last 30 trading sessions. In addition I couldn’t find a list of analyst who follow the company which suggest that it has limited visibility in the investment universe. Finally the company doesn’t get much coverage in the media which again lowers exposure.

An study of the charts will help inform my thoughts on ALOT.

 

 

The three- year chart outlines the advance that investors have enjoyed since January 2012 when it caught a bounce off support at $7.50. Worth mentioning is the golden cross that formed at the same time indicating that buyers were taking control of the market. Currently there appears to be some resistance forming at $10.25. In addition the MACD and RSI have put a caution flag on the track as they indicate that selling pressure is building.

 

 

 

 

 

The six-month chart provides a close – up of the signals provided by the MACD and RSI. In early November a buy signal informed investors that it was time to pay attention and get in on the ride. These indicators are now implying a wave of weakness that is stalking ALOT. All of these factors suggest that the prudent investor will approach this stock with caution. It appears that all the good news has been baked into this cake and that at this time it has risen as much as the ingredients will allow.

 

Make it a profitable day and happy capitalism!

 

 

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