Ken.......and others
I fully agree with your analysis of the earnings report.
First of all, the key to analyzing this report is to see whether or not DSYS is a viable enterprise, and the results indicate that indeed they are. I believe this fact was a major obstacle that prevented many from holding on to the stock, leave alone add to their positions(average down). Now that DSYS has clearly hopped over that difficult obstacle, it is time for them to rebuild. This obviously requires bringing in new business and adding on new revenue. I remember the words of one successful CEO, "The life and blood of any business, is new business", and i believe that DSYS, in order to get to the next stage of the rebuilding process, must bring in new clients. I was very pleased to see the last press release, as i assume Grieves understands that in order to rebuild his business he must bring in revenue, period. While on the subject of Grieves, i strongly believe that in order to regain the confidence and trust of investors, which he foolishly abandoned through his continious lies, the company has to do one thing and one thing only, and that is show a profit for the next 2 quarters. As most older investors are probably gun shy at this point, the only way to bring them back to the stock is through solid results, as i believe that "The proof is in the puddin". Finally, the company MUST regain their Nasdaq listing as quickly as they can, as most serious investors will refuse to enter a BB stock. Obviously, institutions like Kennedy Capital, who i believe were(or still are) in this stock, will refuse to enter unless they can honestly say to themselves that this company is back on track.
Having said all that, i must admit one thing. For the most part, i have personally overcome the "mental block" that had prevented me from being invested in this company. I for one believe that the current risk/reward in being invested in DSYS is very favorable. For one, if we look at the current market value of the company, which is around $6 million in comparison to the sales, it obvious that there remains true value in being invested in DSYS. After all how many companies to we know that trade at less than 6% sales(given the current quarter sales of about $25 million, over 4 quarters). I mean that is Price to Sales(P/S) ration of .16. If we look at the current profit for the quarter($151,200), and assume that the company will not grow any further(for argument's sake, although we expect more), that is a total net profit of about $600,000 for the year. Obviously, the Price to Earnings(P/E)ratio will yield a figure of 10(given 600k over 4.8 million shares gives us .125 cents for the year, and with the current price being 1.25). So there we are, an investment vehicle CURRENTLY(without taking into account additional future business) trading at a P/E of 10, and a P/S of .16. Wow! if only Warren Buffet knew. Anyway, not getting sidetracked, this current valuation and a belief that the company will find a way to pick up business, the price does not reflect the true business at hand. For those who had not understood what i said above, the stock is a steal here.
Now comes the business model. How is the company gonna increase sales. Well for one, the very fact that DSYS is a major local player in Y2k remediation, indicates a considerable pickup in the next 2 years. As i suggested in my previous post, there are still many smaller size companies who have not as of yet fixed their code to be compliant with the larger companies who have spent millions of dollars doing so. Obviously these larger companies will not jeopardize their fully operational systems with those that are not, and thus the smaller companies are risking losing their business. My belief is that as we approach Y2k, these smaller companies will turn to the types of DSYS for quick fixes, and this should bring in a sizeable revenue. In addition, DSYS still has 16 offices in place, and a work staff of over 230 employees and consultants, and im sure they are currently looking to other areas for new and unexplored revenue source. This may include enterprise networks, Eurodollar conversion, and many other such sources.
All in all, i think that the earnings report at hand speaks for itself. We have a real company that produces real sales. I believe if the public will be convinced that DSYS can continue to produce such results, the stock will gain substantial recognition and subsequently we will see appreciation in the price. I think we are a quarter away from seeing a $5 stock, and even with todays internet craze, this still remains a rather lucrative return on investment.
I hope you find this informative, as i personally have gone through numerous attempts at rationalizing events of this company, and these are my humble conclusions.
Good luck to everyone who is holding tight.
Brodway. |
