I'm not much of an expert, but it's quite clear that stocks swing from wildly loved and overvalued to totally ignored and undervalued. Centigram clearly falls into the latter category. One of the pitfalls of value investing is that you often have to wait a long time before the rest of the market comes to appreciate your stock.
Of course, Centigram has not really been posting pretty numbers to get noticed. They had the disastrous 1995, when they were in between product lines. 1996 has shown steady revenue growth, but not enough cost control to translate into profits. I agree with you that things look good for further revenue growth in the future. If they can only hold down costs...
By the way, do you or anyone else have any idea how well their product is accepted in the marketplace? Do people feel that this is really a quality product? Sales seem to be going well, especially in foreign markets, where the field is not as saturated. Revenues would have been even higher this quarter, but a major customer in Europe held back payment...
Once again, value investing usually pays off, but it often takes a lot of patience. I bought Cisco during the mini-bear market of 1994 for 12 dollars when it was very unloved. 6 months later it was still unloved and sitting at 9 dollars. You know the rest...
If we can be reassured that revenue growth will continue for Centigram, then earnings and stock appreciation will eventually follow. One or two nice earnings reports will really make people notice how undervalued Centigram is. How do you feel about future prospects? |
