Penny Stock Picks: Hauppauge Digital (HAUP) Looks Cheap

With all the hype DIDG is about to create based on that growth of internet tv and apps for the iPhone® and iPad® these days, it’s amazing that the penny stock which reported 4 cents EPS in Q4, 2011 is extremely overlooked. Hauppauge Digital Inc. (Nasdaq: HAUP) is trading at just $1.38 and should be on the list of penny stocks to watch for everyone looking for picks. HAUP recorded $15.4 Million in Q4, 2011 revenues and earning a net profit of $roughly 444 thousand in the quarter.

In a digital, mobile world, media can be consumed almost anywhere and on almost any kind of platform. Television viewing, for example, has been liberated from the living room and can now be enjoyed on a variety of devices, including personal computers. Hauppauge Digital is the world’s leading developer of TV tuner products. HAUP announced two weeks ago that Broadway, their live TV streamer for the iPad and iPhone, now also offers TV recording support. HAUP‘s Broadway allows users to record TV programs locally and stream it to an iPad or iPhone.

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HAUP Stock Chart / Analysis:

Market Cap: 13.97M
Enterprise Value: 10.56M

Price/Sales (ttm): 0.31
Price/Book (mrq): 2.92

52-Week High
(May 20, 2011): 2.41
52-Week Low
(Dec 30, 2011): 0.60

Avg Vol (3 month): 133,666
Avg Vol (10 day): 78,325

Shares Outstanding: 10.12M
Float: 7.55M
% Held by Insiders: 20.02%

5 Day History
Percent Change 10.38%
Moving Average 1.40
Average Volume 95,888

Two factors bode well for the penny stock price of HAUP to see an increase:

• PCs are becoming the backbone of many home entertainment systems, and
• TV continues to be an integral part of that entertainment

In the short-term, analog TV broadcasts will be completely replaced by their digital counterpart which makes for fertile ground for the PC-based WinTV tuner of Hauppauge.

HAUP reported Net sales of $15.4 Million for Q4, 2011 compared to $12.8 Million for the same period in 2010. Gross profit was $5 Million for Q4, 2011 compared to $4.3 Million for the same period in in 2010. Most significantly was that HAUP reported Net income of $443,932 for the quarter ended December 31, 2011 compared to a Net Loss of $738,220 for the same period in 2010. That’s an Bottom Line improvement of over $1.1 Million.

About HAUP:

Hauppauge Digital Inc. operates in one business segment, which is the development, marketing and manufacturing of analog and digital video products for the personal computer market and Apple iPad® and iPhone® market. The products Hauppauge Digital offers are similar in function and share commonality of component parts and manufacturing processes.

Hauppauge Digital Inc.’s products are either sold, or can be sold, by the same retailers and distributors in the Company’s marketing channel. Hauppauge Digital Inc. also sells product directly to PC manufacturers. Hauppauge Digital Inc.’s products fall under three product categories:

• Video recorder products, such as USB-Live2, which allows consumers to record video tapes to DVD disc or to some of the Company’s products, such as the HD PVR and Colossus
• TV receivers, which include Broadway and the Company’s WinTV and PCTV TV tuner products
• Non-TV tuner products such as the ImpactVCB, MediaMVP-HD and the Company’s TV applications for the PC and the Apple iPad® and iPhone®

Hauppauge Digital’s TV tuner products enable, among other things, a PC user to watch TV in a resizable window on a PC. The Company’s video recorder products allow consumers to record high definition video from a cable TV or satellite set top box or a game console such as a Xbox 360 or Sony Playstation 3.

Hauppauge Digital’s other non-TV tuner products enable, among other things, the ability to watch and listen to PC based videos, music and pictures on a TV set through a home network.

To view the Most Recent 10-Q for HAUP, Click here. To view HAUP‘s website, click here.

Bottom Line: Hauppauge Digital is one of those hidden gems you find when you do some due diligence. HAUP should be on the list of penny stocks to watch long. There is currently no date for when HAUP will report Q1, 2012 earnings but you can be sure that with sales increasing 20% in the last quarter of 2011 and net income improving by over $1 million, the picture is looking sharper in the first quarter of this year making HAUP one of the better “penny stocks to buy.”


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