July 21, 2003 DSP Group, Inc. (DSPG)
I owned a few of these shares a few years ago before the tech bubble broke. I don't own any DSPG shares at this time but the situation fulfills our criteria and is worth a second look.

DSPG is having a nice day today in an overall crummy market. The stock is trading at $25.23, up $2.29 or 9.98% per the NYTimes on the Web.

According to CNN.Money, DSPG "...develops and markets products and technologies that perform digital signal processing, the electronic manipulation of digitized speech and other digital signals, for use in a variety of telecom applications."

Earnings on this Santa Clara, California company were reported today and were the source of the nice percentage gain on a down day: for the quarter ending June 30, 2003, revenues gained 21% from $31,899,000 to $38,550,000. Excluding one-time charges and gains, 'pro-forma- diluted earnings per share increased 37% to $.26 from $.19 in the same period last year.

Even with the telecom bubble, DSPG maintained a steady record of revenue growth increasing from $51 million in 1998, $58 million in 1999, $87 million in 2000, $89 million in 2001, $125 million in 2002, and extrapolating the current quarter somewhere over $150 million in revenue in 2003.

Free cash flow has improved from $6 million in 2000, $23 million in 2001, and $32 million in 2002.

The balance sheet looks clean with $85.3 million in cash per Morningstar.com, more than enough to cover the $28.3 million in current liabilities and $4.1 million in long-term liabilities.

Yahoo reports that the market cap is $629.5 million with 27.4 million shares outstanding while 26.2 million float. No dividend is paid. The p/e is a little steep at 43.04. There are 670,000 shares out short which represents 2.6% of float or 1.76 trading days.

Overall, this is a nice stock if a little rich due to its p/e premium. Have a great afternoon!

Bob