The Future Of Software…

It seems like just about every business and industry has unique software needs. A fast food chain might need a program that monitors sales and keeps track of inventories. A manufacturer needs regularly updated information on raw materials. A pipeline company wants to know the volume in storage tanks.

We see these highly personalized and engineered software miracles in every industry. Where do they all come from? These software applications generally aren’t built in house. They’re outsourced to companies that specialize in Enterprise Resource Planning (ERP).

This type of technology isn’t the future, it’s the present. Pretty much every company and manufacturer needs these products. And that’s why this Chinese ERP designer is growing revenue so quickly.

 

QUICK FACTS

Ticker                                     CIS

Industry                                  Information Technology Services

Recent Price                         $3.20

Market Cap                            $144.9m

Shares Outstanding              45.3 m

Average Volume                     355,473

Dividend Yield                         N/A

Website                                  http://www.camelotchina.com/en/

 

COMPANY DESCRIPTION

Camelot Information Systems (CIS) is China’s largest domestic supplier of ERP solutions. They have the country’s most comprehensive team of systems, applications, and products in data processing.

Here’s an example of what they do. Camelot was hired by a client who manufactures furnaces. The furnace company had implemented a system that just wasn’t working out. They had incomplete databases, inaccurate information and logistics, inventory transaction problems, all kinds of issues.

Camelot’s pros went in there, tied up the loose ends and ironed out the conflicts. The furnace manufacturer was so pleased with the revamped system they implemented it companywide.

 

FINANCIALS

Camelot is continuing to grow revenue despite the economic slowdown. Revenue is up nearly 35% year over year in Q2 2011 reaching $59.4 million. CIS has a net income of approximately $2.9 million and $354.6 million in assets, up from $341.4 last year. And the company has no debt.

The valuations are absurdly low. CIS has a price-to-book of 0.6x and price-to-sales ratio of 0.7x. This company’s revenue and assets are on sale at a huge discount.

 

KEY METRICS ANALYSIS

Trailing P/E                                       8.1 x

Price / Sales                                     0.7 x

Return on Assets                             6.2%

Insider ownership                             N/A

Short Ratio                                       4.2 x

Current Ratio                                    3.6 x

Total Debt To Equity                          N/A

 

RECENT EVENTS

The most important recent event is the huge drop in this stock’s price in Q3. This is a company with a 52-week high of $28.18 – what could possibly have done that? Earlier in October management came out and pared down their sales estimates for the rest of 2011.

Combine that with some board shakeups and you’ve got a lot of panicking investors. In October CIS named two new members to the board who specialize in the areas of legal and corporate governance.

These two events, although not monumental in the grand scheme of things, has leveled this stock’s price.

 

MANAGEMENT TEAM

Yiming Ma – CEO

Brett Ho – COO

Heidi Chou – President and Director


STOCK ANALYSIS

 

 

 

 

 

Chart Courtesy of StockCharts.com

 

At these valuations you have to lick your lips. If the price even gets near its 200-day moving average you could have over a 300% return!

FVE’s 52-week low was $2.38 and the 52-week high was $28.18.  Right now the stock is trading at $3.20.  The 50-day moving average is near $3.75 a share and the 200-day moving average is at $11.53.  The company has a market cap of $144.9 million and 47.6 million shares outstanding.

 

 

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Boomers Retire, You Profit…

We’re on the verge of a major shift in demographics. The baby boomer generation is entering retirement. Over the next 20 years we will see the upper end of the age spectrum grow substantially… and that means more demand for simple items… items like healthcare.

A handful of companies are set to benefit from this trend… and one that’s certain to get a lot of business is long term care facilities.

QUICK FACTS
Ticker                                      FVE
Industry                                   Long-Term Care Facilities
Recent Price                          $2.94
Market Cap                             $142.7 m
Shares Outstanding               47.6 m
Average Volume                     153,151
Dividend Yield                          N/A
Website                                   http://www.fivestarseniorliving.com/

COMPANY DESCRIPTION

Five Star Quality Care (FVE) operates senior living communities in 29 states. They provide a broad range of services. Various therapies, onsite pharmacies, prosthetics, and even radiology are just a few of their additional capabilities.

The company has three specific long-term care options. The largest, assisted living, accounts for 48.8% of their business. Independent Living is second at 28.9%, and Skilled Nursing facilities at 22.3%. FVE has all totaled approximately 24,000 units at 230 properties.

Two of their properties are rehabilitation hospitals, 13 are outpatient clinics, and five institutional pharmacies.

FINANCIALS

Five Star had $481.6 million in assets at the end of June 2011. In fact their twelve month trailing revenue at the end of Q2 2011 was $1.2 billion. This is a big company with a price to book of 0.6x!

Revenue was up over $10 million year over year in Q2 2011. The company has a healthy return on equity of 12.6% and margins are all in the positive.

Their Independent and Assisted Living community occupancy is approximately 86%. FVE also has the benefit of having the lowest general and administrative expenses as a percentage of revenue in the industry. Their G&A is only 4.5% of revenue; their nearest competitor is 5.3%.

In fact, of the four largest publicly traded firms in this industry FVE is the only one to have nine straight quarters of profitability.

KEY METRICS ANALYSIS

Trailing P/E                                     5.3 x
Price / Sales                                   0.1 x
Return on Assets                            3.9%
Insider ownership                           12.1%
Short Ratio                                      2.8 x
Current Ratio                                  1.0 x
Total Debt To Equity                        28.8 x

RECENT EVENTS

Right now the industry is trying to wean itself off of public sources of revenue. FVE was ahead of the curve when government Medicare reimbursement was recently ‘recalibrated’ down 11% for the 2012 fiscal year. This primarily affects the skilled nursing segment of the company’s business.

Management is making a concerted effort to continue reducing Medicare and Medicaid reimbursement revenue. They are already down to only 29% of the company’s senior living revenue stream.

At the same time the company is aggressively expanding. FVE announced plans to acquire 40 more communities that are private pay, and almost none of the 5,000 units forecasted in 2011 will include skilled nursing.

MANAGEMENT TEAM

Bruce J. Mackey Jr. – CEO
Rosemary Esposito, R.N. – COO
Paul V. Hoagland – CFO
Vern D. Larkin – VP, General Counsel and Secretary

STOCK ANALYSIS

 

 

 

 

 

 

Chart Courtesy of StockCharts.com

It looks like FVE found a bottom in early October. But don’t expect it to hang around these levels for long.

FVE’s 52-week low was $2.28 and the 52-week high was $8.95. Right now the stock is trading at $2.94. The 50-day moving average is near $2.82 a share and the 200-day moving average is at $5.44. The company has a market cap of $142.7 million and 47.6 million shares outstanding.

 

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Profit From Technology Outsourcing

As I write this, the Street is holding its breath. Earnings season started yesterday. Who will be the Q3 winners? How will the market react? What will guidance look like?

It’s make or break time for a lot of value stocks.

We’ve found a new stock you’ll want to put on your radar. This company is growing revenue and has surprisingly strong earnings. Unfortunately the stock was sold off in the recent market downdraft.

This is a stock that mistakenly found its way to the bargain bin. Let’s take a look before the market realizes the price tag is wrong.

QUICK FACTS
Ticker                                       UCTT
Industry                                    Semiconductor – Specialized
Recent Price                           $4.54
Market Cap                              $103.1 m
Shares Outstanding                22.8 m
Average Volume                      64,329
Dividend Yield                          N/A
Website                                   http://www.uct.com/

COMPANY DESCRIPTION

As you know, semiconductor manufacturing is very complicated. It’s not a product that you can simply manufacture at home in your garage. It takes cutting edge technology, millions of dollars of equipment, clean room facilities, and lots of engineering experience.

Most semiconductor manufacturing facilities are built on the back of very advanced pieces of equipment.

The equipment is so specialized, that individual companies are now focused on developing only distinct processes.

And that’s where Ultra Clean Holdings (UCTT) comes in.

They design and build subsystems for chemical and gas delivery in semiconductor manufacturing equipment. Different types of systems supply gasses and or chemicals as needed.

Best of all, they work hand in hand with their clients from the R&D stage of development all the way to the end product.

FINANCIALS

UCTT’s revenue was up 26% year over year in Q2 2011. Their bottom line was up about the same percentage.

While revenue has grown, the company’s expenses have been well controlled.

Management is working hard to control expenses because of the potential for continued slow economic growth. Management is determined to stay profitable through the slowdown.

KEY METRICS ANALYSIS

Trailing P/E                                    4.5 x
Price / Sales                                  0.2 x
Return on Assets                          11.8%
Insider ownership                          15.5%
Short Ratio                                     6.3 x
Current Ratio                                 2.7 x
Total Debt To Equity                       25.2 x

RECENT EVENTS

Although the company specializes in gas delivery systems for semiconductor manufacturing they’re actively expanding their product lines. The company has made inroads into solar panel and medical equipment manufacturing equipment.

UCTT has expanded sales to the point where only about 55% of their revenue is from gas delivery systems.

The company’s also focusing on expanding manufacturing in Asia. It’s a growing market, and a number of new and existing customers are looking for UCTT’s expanded capabilities. The company opened two manufacturing facilities in Shanghai and one in Singapore in 2010.

MANAGEMENT TEAM

Clarence Granger – CEO
Gino Addiego – COO
Casey Eichler – CFO
Bruce Wier – Senior VP of Engineering

STOCK ANALYSIS

 

 

 

 

 

 

Chart Courtesy of StockCharts.com

UCTT’s price started floundering in July, along with the market. It looks as if this stock has found a bottom of about $4 in early October.

PSTR’s 52-week low was $3.77 and the 52-week high was $13.62. Right now the stock is trading at $4.54. The 50-day moving average is near $4.76 a share and the 200-day moving average is at $8.00. The company has a market cap of $103.6 million and 22.8 million shares outstanding.

 

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Domestic Energy On The RISE!

To say the market’s been volatile is an understatement.  In these uncertain times it’s important to invest in what you know.  A good story with good financials will eventually lead to a rising stock price.

And here’s a company that’s ready for your radar.

 

QUICK FACTS

Ticker                                      PSTR

Industry                                   Oil & Gas Drilling & Exploration

Recent Price                           $3.06

Market Cap                              $28.8 m

Shares Outstanding                9.43 m

Average Volume                      28,611

Dividend Yield                          N/A

Website                                   http://www.pstr.com/

 

COMPANY DESCRIPTION

PostRock Energy Corporation (PSTR) is a regional energy acquisition, exploration, development, production and transportation company.

They are the largest operator in the Cherokee Basin, which spans Kansas and Oklahoma.

PSTR owns and operates over 2,800 wells and approximately 2,200 miles of gas gathering lines in the Cherokee Basin. They also own approximately 1,100 miles of interstate pipeline in Kansas, Oklahoma, and Missouri.

 

FINANCIALS

In the second quarter of 2011, PSTR grew revenue by about $1.7 million. At the same time they’ve cut back on their costs.  Total savings are approaching nearly $4.1 million year over year.

Last year the company suffered a loss of $9.6 million.

This year the company generated a net income of $7.5 million… that works out to an EPS of $0.68 a share!  The future is looking bright.

PSTR has also been paying down its long term debt. It’s down 12% compared to where it was a year prior.

 

KEY METRICS ANALYSIS

Trailing P/E                                       0.79 x

Price / Sales                                     0.3 x

Return on Assets                             7.4%

Insider ownership                            18.3%

Short Ratio                                       3.2 x

Current Ratio                                   1.22 x

Total Debt To Equity                          N/A

 

RECENT EVENTS

PSTR recently finished liquidating some of their Appalachian Assets. In all they sold $44.6 million in holdings. The proceeds from that paid off an outstanding debt of one of their subsidiaries.

The Cherokee Basin is this company’s bread and butter. Management has recently been pursuing a strategy of consolidation in that area. They recently acquired 14.9% purchase of another Basin operator, Constellation Energy Partners.

There’s also been a lot of Basin production news from the company in the first half of 2011. PSTR brought 55 new wells online so far this year. The company is also using modern technology to reactivate ‘legacy wells.’ Altogether they reactivated 49 wells.

 

MANAGEMENT TEAM

Terry W. Carter – CEO

Jack T. Collins – CFO

Tom A. Saunders – Executive VP

Richard Marlin – VP Engineering and Operations, Mid-Continent


STOCK ANALYSIS

 

 

 

 

 

 

 

Chart Courtesy of StockCharts.com

PSTR’s stock has suffered along with the rest of the market.  As a result, new money flowing into the stock is able to grab shares at great valuations!

PSTR’s 52-week low was $3.02 and the 52-week high was $8.45.  Right now the stock is trading at the 52-week low.  The 50-day moving average is near $4.23 a share and the 200-day moving average is at $5.71.  The company has a market cap of $27.8 million and 9.4 million shares outstanding.

 

 

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