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Here is some highlightsof the analysis on VINF given by Individual Investor and why they feel the stock will triple in value in the next year: Vista Information Solutions Inc provides risk management software for the insurance, finance and environmental engineering industries. Initial Recommendation, 1998 Magic 25 and 12/5 update (12/05) Magic 25 and 12/5 update Ticker: VINF Vista Information Solutions usually helps banks and insurers skirt financial disaster. But this summer the San Diego risk-assessment company faced a near meltdown of its own. When Vista shareholders' equity dipped below Nasdaq's minimum in August, the exchange threatened to delist the stock. Vista scrambled to strengthen its balance sheet with a $5 million private placement and a $5.1 million debt-to-equity conversion. The fast footwork paid off, reassuring regulators while eliminating more than $6 million in debt and $1 million in annual interest expenses. Shares popped 70%, to $5, before settling back to a recent $3.88-still 88% higher than it was when we featured the company in our October issue ("Scouting Report"). What has investors brimming with optimism is the likelihood that Vista will turn its first-ever profit early in 1998. The company has sped up the amortization of goodwill, and it is poised to start the year with a clean slate, according to CFO Steve Hamilton. Vista's newfound financial health, combined with a host of potentially lucrative deals, presents investors with a stock that could reach $7 over the next 12 to 18 months, predicts Brad Regier of the investment bank Cruttendon Roth in Los Angeles. "Vista," Regier says, "is a great story." The fiscal makeover leaves Vista free to focus on its primary business-compiling databases that provide a risk-adjusted picture of a neighborhood or a property's value. To do that, Vista mines government agency reports, public databases, and private sources of information on everything from a property's proximity to a hazardous-waste dump to a community's crime and fire rates. Then the company formats the data and sells it to banks, insurers, or environmental engineers. In the past, customers relied on periodic written reports, but those grew stale. Thanks to Vista, they can receive updates more frequently and so make timely adjustments to rates, thus saving money on payouts and misjudged loans. Meanwhile, Vista can provide those updates for little additional cost, creating a revenue stream both predictable and highly profitable. The key to Vista's success is a proprietary technology called GUS, the Geographic Underwriting System, which plots information on a computerized map. Using the map, customers can easily pinpoint a host of important details, such as the distance to a chemical spill or a police station. The result: more accurate insurance rates and wiser bank loans. But even with GUS, Vista might not have gotten the attention of behemoth insurers without the partnership of Insurance Services Office, a New York-based company that agreed in 1994 to help Vista sell its services for a 50% share of sales. For Vista, it's an attractive arrangement. ISOalready markets a variety of services to more than 1,500 property and casualty insurance companies, and it's 85% owned by 236 insurer groups, which gives it extra leverage in reaching key decision makers throughout the insurance industry. And with the two companies in only the third year of a 15-year deal, the risk of a breakup is low. After three years of groundwork, the relation is beginning to bear fruit. Earlier this year, ISO helped Vista win contracts with State Farm Fire and Casualty of Bloomington, Illinois (the nation's largest home insurer), and Prudential Property & Casualty Insurance of Newark, New Jersey. Those deals will provide $7 million in revenue to Vista alone over the next three years and, more important, validation for the new technology. Meanwhile, Texas recently became the first state to mandate that insurers use GUS for their ratings systems. CFO Hamilton says other big insurers are reviewing GUS, but he refrains from predicting when the next contract will be inked. "Insurers are very cautious," he says. "They do a lot of testing." When pressed, though, Hamilton hinted that one deal may be wrapped up in 1998 and that California is considering recommending that its insurers use GUS. GUS's new fame bodes well for Vista, but as the company's sights have risen, so have the market's expectations. Vista's shares have jumped more than fivefold since the beginning of 1997. Should the company fall short, its stock will tumble. Keep in mind, too, how volatile the stock is, regularly swinging 5% to 10% in a single day. Investors with low tolerance for risk may want to look elsewhere. But those who take the plunge may soon find their courage rewarded. Regier predicts GUS revenue will more than double in 1998, to $6.4 million, and Vista's environmental data software, StarView, will contribute another $11.8 million, a 62% jump over 1997 estimates. With costs largely fixed, the analyst estimates the operating margin should increase to 30% in 1998 and 40% in 1999, generating as much as $0.18 and $0.29 a share, respectively. If Vista can come close to hitting those numbers, its stock could easily jump 50%, leaving its days in the Nasdaq doghouse far behind. -Edward R. Silverman, with David Sterman (Went to press 11/18/97 with VINF closed at $3.88) ----------------- Update: Recent sell-off creates buying opportunity After trading in the $1-$2 range for most of 1997, shares of Vista Information Solutions surged to $5 in late September when Cruttenden Roth initiated coverage with a Strong Buy rating. By the time Individual Investor went to press in mid-November, the shares had drifted down to around $4. Since then, they've become cheaper still. Until the company announces more contracts, we do not anticipate much further price movement. This begs the question: When can we look for further announcements? Our sources indicate that we may see a contract announcement this month or in January, though Tom Gay, Vista's President, is conservatively steering investors not to expect news until the end of the first quarter of 1998. Many potential customers for Vista's GUS system have been test-driving the product for several quarters. Based on past experience, those trials should be converting into orders around now. We stand by our expectation that Vista will sign several significant contracts over the next twelve months; near-term timing of those orders is absolutely irrelevant. It is GUS's long-term potential that matters. In late November, Vista filed an S-3 with the SEC. This document is used when officers and directors register their shares in anticipation of an eventual sale. However, management stresses that this action was taken merely to qualify for a listing on the Nasdaq National Market. Though this would appear to be a benign situation, we will monitor it closely. As the company crosses into profitability in 1998 for the first time, we are looking for Vista to earn $0.20 a share next year and $0.35 in 1999. With VINF trading at less than 10 times that 1999 outlook, we recommend buying the shares in anticipation of them hitting $8 to $12 in the next 12 months. (Posted 12/5/97 with VINF trading at $3.69) VINF Analysis Archive ********** The stock appears to be very undervalued at these levels and looks like a great buy************ | ||||||||||||||
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