For anyone interested, CGN made The Motley Fool's daily double list.
HOW DID IT DOUBLE?
Cognitronics rang and investors answered. A strong quarterly report and
surging confidence at its May annual meeting has sent shares more than three
times higher than the $3 1/2 the shares were fetching at the start of the year.
The stock had dialed up steady gains through the first four months of the year.
When Cognitronics announced blowout first quarter results on April 28 and
followed it with an optimistic outlook at its May 8 shareholder meeting, the
stock went into speed dial and rewarded investors who stayed on the line.
BUSINESS DESCRIPTION
Cognitronics makes announcers and voice processing products for telephone
companies. Its passive announcers are used to inform callers about network
conditions or procedures. Its more advanced intelligent announcers provide
voice announcements in connection with custom calling features like selective
call forwarding.
The Connecticut-based company also sells entire central office telephone
systems that provide voice processing, on-hold music or messaging, and
interactive voice response, fax, and voice mail features.
FINANCIAL FACTS
Income Statement
12-month sales: $19.1 million
12-month income: $1.4 million
12-month EPS: $0.42
Profit Margin: 7.3%
Market Cap: $37.9 million
Balance Sheet
Cash: $5.0 million
Current Assets: $13.6 million
Current Liabilities: $4.2 million
Long-term Debt: $0.4 million
Ratios
Price-to-earnings: 24.9
Price-to-sales: 2.0
HOW COULD YOU HAVE FOUND THIS DOUBLE?
Cognitronics' share price is not the only thing that has tripled. Its sales order
backlog has gone from $2 million at the start of the year to $5.2 million in early
May. That was one of the many golden nuggets that stockholders were
greeted with at last month's annual meeting. The company also announced that
revenues for the current quarter would increase substantially over the 1996
second quarter sales of $5.1 million.
Even after this news, the stock failed to have an immediate response. As a
matter of fact, for the entire month of May, every single trading day had
5-figure volume, no more, no less. A similarly muted reaction happened the
month before when Cognitronics reported earnings of $0.14 a share vs. $0.03
for the first quarter. Low volume, no immediate surge, nothing more than the
continuation of the slow yet calculated uptrend that had begun in the spring.
So, while one can have picked up the stock for less than $6 a share after the
quarterly report or barely above $7 after the rosy annual meeting, it was not a
swift rise. This gave potential investors ample time to study the situation before
making the call.
WHERE TO FROM HERE?
The benefit of catching a "shadow" stock is that analyst coverage is often
incomplete if present at all. In the case of Cognitronics, the only analyst is
asleep at the wheel, on-hold with the same static earnings estimates for
months. While the 1997 projection for $0.60 a share may make sense for a
company that reported $0.14 in the first quarter, it is ignoring the expected
sequential gains throughout the year. Since the end of the first quarter, the
backlog has continued to grow from what was then $3.4 million. Still, the
analyst has left the estimate mummified for months, and easy pickings for the
company to beat as the year wears on.
Will Wall Street eventually find Cognitronics on their radar? Will the company
finally see a trading day where volume exceeds 100,000 shares, something it
has not seen since one lone summer day in 1995? If the company continues to
perform, both in terms of fiscal performance and capital appreciation, the
company is bound to rise from the shadows. Then, in call-forwarding
splendor, the early believers will be rewarded once again, only this time in
direct sunlight. |
