TNXI - The Guru's Buy and Hold Is Ripe For A Rally

TNXI, a Guru Buy and Hold stock, has recently sold off after the initial earnings euphoria.  This was to be expected.  Penny stock traders have very short memories and move on to the next active stock.  The same thing happened to POWN early this year after the Disney stake was revealed.  The stock mounted a 2-3 day surge and then sold off.  After the sell-off POWN underwent an impressive rally bringing the stock from less then $.10 a share to over $.70 a share.  I think the same type of price action is coming TNXI's way.

Why?

TNXI had over $28 million in revenues in 2009 with a net income of $.04 a share.  Considering this stock was recently trading for $.08 a share, to say this stock is undervalued would be quite modest.  I do understand the company has some significant debt obligations, but if you take away interest payments the picture gets even rosier.

My point is this: the company has finally turned the corner.  When TNXI has finally broken free and paid off its debt the stock will be trading at $2 - $3 a share.  Do the math now on the EPS.  Using a conservative multiple of 10 for just the 4th quarter result of $.04 a share, TNXI would be a $.40 stock.  Factor in another 3 quarters of equal or greater net income numbers and you are looking at a $1.60 stock.  Use a multiple of 15, still very conservative and you get price per share of $.60 just on the 4th quarter number, $2.40 if you carry that number through out the year.

The bottom line: this stock is trading well below what it's true value is.  By the time TNXI has truly turned the corner this stock will have soared well beyond today's close.  Remember this was a $7 a share stock only a few years ago.

TNXI remains a Guru Buy and Hold.  Keep it on your watchlist.