Drirak,
The positives -
*From a valuation perspective, they have a trailing earnings growth rate of 30%+; a PE of 13.5; a PEG below .5 *You don't find many of those.
*They are expanding into Intel processor based server products, the fastest growing segment of servers.
*They are expanding geographically, into Europe and Asia.
*They are not subject to memory price pressure, if the price of memory goes up they just add that to their sales price and tack on their GM. In fact, when memory prices are going up, their revenue and earnings increase.
*The management seems strong. MHO from listening to the CC.
The negatives -
*A small company, with little sponsorship or coverage.
*Sequential earnings growth this last quarter was a bit disappointing.
*Non-proprietary products. If they get big enough, a giant could decide to get into the business. They seem to have excellent service, with same day delivery.
*The company trades pretty much with the SOX, and without sponsorship, fundamentals can get lost with regard to the stock price/valuation, as they seem to be right now.
It's good news they hired PR and IR folks. They were using a firm for IR, not doing a great job IMHO. When the stock went up into the 40's, it was because of day trading folks, it started getting touted on the BB's, not institutional. My guess is that fair valuation for this company is at a PEG of 1, or about $30. a share, maybe a little less because it is small with minor risk factors.
As far as the outlook, it depends on your perception of the outlook for total functioning servers. My guess is that when someone buys a new server, they buy it with adequate memory for their current needs. As time goes on, they find they need more memory, and Dataram is their low price solution (instead of going back to the server manufacturer). So they rely on the total installed server base as their marketplace, not new server sales. I feel the future looks very bright on the demand side.
When I get a chance I'll call their new IR person you talked about, and post what I find out. By the way, this is the only really small company that I own.
John |
