SDGL - Earnings Per Share of $.02 Gives A Conservative Valuation of $.20

In a penny stock market that is all about awareness and attention SDGL has neither going for it.  It represents an immensely talented potential superstar playing for the Kansas City Royals.  A player that would grace the headlines in a big city, but instead is forgotten because no one knows he exists.  Eventually someone takes notice and that once hidden superstar makes it big.  I think the same will happen for SDGL once people begin to see its value.

Why is SDGL a virtual unknown?  Because they haven't been using press releases to update the investing public.  Most investors tune into the news wires and trade the news.  SDGL has been issuing their material events via SEC filings and investors haven't noticed them.  This is a company that has been around for almost 20 years. They should be around to see another 20 years and more yet no one seems to have taken notice.


Take for instance this past week.  SDGL issued an 8-k about a $6.06 million joint venture they are taking part in.  The stock did nothing that day.  Investors had not a clue about this news.  For a $.02 stock a $6.06 million contract is quite an event. 


On May 31st, only two weeks ago, SDGL's subsidiary acquired 100% of BlueCircle Technology Sdn Bhd, for a purchase price of $1.55 million.  This is big news for your typical $.02 stock, but SDGL did not budge.  It was as if no one knew about this material event, and they likely didn't.

SDGL does not fit the average penny stock mold.  Instead of crafting a well spun press release in an attempt to lure shareholder into buying their stock, SDGL has a bread and butter approach, one that contrasts what you would expect from a $.02 stock.  It's as if they don't want investors to see the value they are bringing to shareholders and are not immediately concerned with the price of their stock.  They know that as they bring value into the company the stock price will begin to reflect that value.

Speaking of value, let's get to the impressive numbers this company posts on an annual basis.  In 2009 SDGL had revenue in excess of $38.5 million and net income of more than $2 million.  This gives an annual earnings per share of almost $.02.  A conservative 10x multiple gives you a $.20 target, and that does not factor in growth and the recent acquisitions.  You are looking at a 1,000% gain from here if the market puts just a conservative multiple on the stock.  If the market factors in growth and recent acquisitions that gain could go substantially higher.

Less than two years ago SDGL was a $.11+ stock, and due to a lack of investor knowledge about the stock it has languished.  I think this gem is ready to be discovered and the price per share will begin to show the inherent value of the company and its earnings growth potential.

I think SDGL offers a great chance to get into a penny stock before the crowd and the stock heads to were it is fairly valued.  Currently this is one of the most undervalued stocks out there.  I think that will change soon, its only a matter of time.