Dave Gore's Trades That Make Sense Message Board

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Strategies & Market Trends : Dave Gore's Trades That Make Sense

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To: hotlinktuna who wrote (10089)	7/26/2002 12:12:58 PM
From: Dave Gore	Read Replies (2) of 16631

CDCY ALERT ($6.45)-- A very cheap and compelling security stock. Trading at .8 times sales. Down from $19+ to $6+. (near 52 week low); EPS = .87 and $1.10 next year; Growth consensus = 20% NEWS: "7th fastest growing small company siliconinvestor.com Interesting analysis from THE STREET: thestreet.com "Some small-caps are worth a look. Take Compudyne (CDCY:Nasdaq - news - commentary - research - analysis) and Candies (CAND:Nasdaq - news - commentary - research - analysis). Compudyne makes everything from attack-resistant windows and doors to alarm systems to so-called safe rooms. Every metric I'm looking at suggests that business is getting better by the day -- and that the stock comes nowhere close to reflecting the company's improving fundamentals. For starters, take a look at the backlog. At the end of the April quarter, total order backlog topped $135.5 million -- up 23% from the fourth quarter and up nearly 30% from the same period last year. That's huge! Then check out its recent purchase of a company called Tiburon, which makes software that controls the command and structures and maintains records of more than 1,000 emergency agencies around the country. The deal is important for two reasons: Software products get higher gross margins, and the deal puts Compudyne in line to sell products to these government agencies down the road. What did Compudyne pay for Tiburon? Just $30 million in cash and stock! In my mind that's a steal given that the company will add north of $47 million in revenue over the next year, as well as more than $57 million in firm backlog. Last, take a look at its valuation. The stock trades at under 0.8 times sales. That's extremely cheap given that the company has the potential to grow its earnings at a more than 25% clip over the next year, as its backlog indicates. Bottom line: On the basis of Compudyne's improving backlog and earnings outlook, brighter days are ahead."

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