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Here is some highlightsof the analysis on VINF given by Individual Investor and why they feel the stock will triple in value in the next year:
Vista Information Solutions Inc provides risk
management software for the insurance,
finance and environmental engineering
industries.
Initial Recommendation, 1998 Magic
25 and 12/5 update
(12/05)
Magic 25 and 12/5 update
Ticker: VINF
Vista Information Solutions usually
helps banks and insurers skirt financial
disaster. But this summer the San Diego
risk-assessment company faced a near
meltdown of its own. When Vista
shareholders' equity dipped below
Nasdaq's minimum in August, the
exchange threatened to delist the stock.
Vista scrambled to strengthen its balance
sheet with a $5 million private placement
and a $5.1 million debt-to-equity
conversion. The fast footwork paid off,
reassuring regulators while eliminating
more than $6 million in debt and $1
million in annual interest expenses. Shares
popped 70%, to $5, before settling back
to a recent $3.88-still 88% higher than it
was when we featured the company in
our October issue ("Scouting Report").
What has investors brimming with
optimism is the likelihood that Vista will
turn its first-ever profit early in 1998. The
company has sped up the amortization of
goodwill, and it is poised to start the year
with a clean slate, according to CFO
Steve Hamilton. Vista's newfound
financial health, combined with a host of
potentially lucrative deals, presents
investors with a stock that could reach $7
over the next 12 to 18 months, predicts
Brad Regier of the investment bank
Cruttendon Roth in Los Angeles. "Vista,"
Regier says, "is a great story."
The fiscal makeover leaves Vista free to
focus on its primary business-compiling
databases that provide a risk-adjusted
picture of a neighborhood or a property's
value. To do that, Vista mines
government agency reports, public
databases, and private sources of
information on everything from a
property's proximity to a
hazardous-waste dump to a community's
crime and fire rates. Then the company
formats the data and sells it to banks,
insurers, or environmental engineers.
In the past, customers relied on periodic
written reports, but those grew stale.
Thanks to Vista, they can receive updates
more frequently and so make timely
adjustments to rates, thus saving money
on payouts and misjudged loans.
Meanwhile, Vista can provide those
updates for little additional cost, creating
a revenue stream both predictable and
highly profitable.
The key to Vista's success is a
proprietary technology called GUS, the
Geographic Underwriting System, which
plots information on a computerized map.
Using the map, customers can easily
pinpoint a host of important details, such
as the distance to a chemical spill or a
police station. The result: more accurate
insurance rates and wiser bank loans.
But even with GUS, Vista might not have
gotten the attention of behemoth insurers
without the partnership of Insurance
Services Office, a New York-based
company that agreed in 1994 to help
Vista sell its services for a 50% share of
sales. For Vista, it's an attractive
arrangement. ISOalready markets a
variety of services to more than 1,500
property and casualty insurance
companies, and it's 85% owned by 236
insurer groups, which gives it extra
leverage in reaching key decision makers
throughout the insurance industry. And
with the two companies in only the third
year of a 15-year deal, the risk of a
breakup is low.
After three years of groundwork, the
relation is beginning to bear fruit. Earlier
this year, ISO helped Vista win contracts
with State Farm Fire and Casualty of
Bloomington, Illinois (the nation's largest
home insurer), and Prudential Property &
Casualty Insurance of Newark, New
Jersey. Those deals will provide $7
million in revenue to Vista alone over the
next three years and, more important,
validation for the new technology.
Meanwhile, Texas recently became the
first state to mandate that insurers use
GUS for their ratings systems.
CFO Hamilton says other big insurers are
reviewing GUS, but he refrains from
predicting when the next contract will be
inked. "Insurers are very cautious," he
says. "They do a lot of testing." When
pressed, though, Hamilton hinted that one
deal may be wrapped up in 1998 and that
California is considering recommending
that its insurers use GUS.
GUS's new fame bodes well for Vista,
but as the company's sights have risen, so
have the market's expectations. Vista's
shares have jumped more than fivefold
since the beginning of 1997. Should the
company fall short, its stock will tumble.
Keep in mind, too, how volatile the stock
is, regularly swinging 5% to 10% in a
single day. Investors with low tolerance
for risk may want to look elsewhere.
But those who take the plunge may soon
find their courage rewarded. Regier
predicts GUS revenue will more than
double in 1998, to $6.4 million, and
Vista's environmental data software,
StarView, will contribute another $11.8
million, a 62% jump over 1997 estimates.
With costs largely fixed, the analyst
estimates the operating margin should
increase to 30% in 1998 and 40% in
1999, generating as much as $0.18 and
$0.29 a share, respectively. If Vista can
come close to hitting those numbers, its
stock could easily jump 50%, leaving its
days in the Nasdaq doghouse far behind.
-Edward R. Silverman, with David
Sterman
(Went to press 11/18/97 with VINF
closed at $3.88)
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Update: Recent sell-off creates
buying opportunity
After trading in the $1-$2 range for most
of 1997, shares of Vista Information
Solutions surged to $5 in late September
when Cruttenden Roth initiated coverage
with a Strong Buy rating. By the time
Individual Investor went to press in
mid-November, the shares had drifted
down to around $4. Since then, they've
become cheaper still.
Until the company announces more
contracts, we do not anticipate much
further price movement. This begs the
question: When can we look for further
announcements? Our sources indicate
that we may see a contract announcement
this month or in January, though Tom
Gay, Vista's President, is conservatively
steering investors not to expect news until
the end of the first quarter of 1998.
Many potential customers for Vista's
GUS system have been test-driving the
product for several quarters. Based on
past experience, those trials should be
converting into orders around now. We
stand by our expectation that Vista will
sign several significant contracts over the
next twelve months; near-term timing of
those orders is absolutely irrelevant. It is
GUS's long-term potential that matters.
In late November, Vista filed an S-3 with
the SEC. This document is used when
officers and directors register their shares
in anticipation of an eventual sale.
However, management stresses that this
action was taken merely to qualify for a
listing on the Nasdaq National Market.
Though this would appear to be a benign
situation, we will monitor it closely.
As the company crosses into profitability
in 1998 for the first time, we are looking
for Vista to earn $0.20 a share next year
and $0.35 in 1999. With VINF trading at
less than 10 times that 1999 outlook, we
recommend buying the shares in
anticipation of them hitting $8 to $12 in
the next 12 months.
(Posted 12/5/97 with VINF trading at
$3.69)
VINF Analysis Archive
********** The stock appears to be very undervalued at these levels and looks like a great buy************ |
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