I will give you my analysis on VRTY. The company is NOT profitable YET, therefore, there will be significant pressure on value of its stock. The market and invetsment community are looking for PREDICTABLE, STABLE REVENUES, COST CONTROLS and, as an output, growing EPS.
VRTY has come down to planet Earth from it market introduction a 1.5 year ago, when the word "Internet" meant P/E multiple of 500 or more to be accetable. No more -- the basic fundamentals of making money will drive this stock.
VRTY has a lot of positive things:
1. Strong management team -- very important
2. Strong Product Line -- they are a "defecto" of search engines
3. Strong Cash position -- no long term debt, a lot of cash on hand.
4. Solid Strategic Plan -- focused on "Pull/Push" of information for the Corporate Intranets. To support this strategy they paid $10 million dollars for Cognisoft, an "itellectual property for "push" technology for InteliServe.
5. Excellent customer base -- "Who is Who?" in the world of technology.
VRTY, however, had been suffering from the following:
1. Unpredictable Revenue Growth -- for the past four quarters its been a roller coaster.
2. High expense structure -- purely due to R&D for Search'97, their premier product, plus acquisitions, mentioned above.
3. Initially very high market valuation (P/E of 1400 back in '1995) which had a lot of "hot air" and dissapeared over time.
4. Long cycle time for realizing revenues, i.e. when VRTY announces a partnership with a customer, it takes on an average 3 to 6 months to see any cash. This is due to the fact that they consult with their customers first, performing analysis, needs assesment, etc. Keep in mind, they make money by selling software licences, that is what counts.
5. Very Competitive Market.
As to Kumar's evaluation, I agree that $7.00 is a zone in which it play until they can show predictable growth in revenues and profitability. I do not feel it will go below that point...
The only wild card here is that VRTY will be sold -- this action will increase shareholders value in a short term. However, I find that highly unlikely.
My prediction is that VRTY will start making money very shortly -- possibly this coming quarter. Many things are getting together -- the most imprtant one is BETA availablity for InteliServe, Search 97. This, in my opinion, is the best potential for revenues in the upcoming year.
This stock is designed for a disciplined, long term investors and at this price, is a very attractive play. If your goals are in-and-out strategy, look someplace else. There are a lot of "hot" stocks out there.
I hope this is helpful.
Jack |
