Landlines are going the way of the dinosaurs. Logistically it impacts a huge number of modern day conveniences… and it’s spurred a lot of innovation.
For example, one in six homes now have a monitored security system. In the past, security systems communicated with monitoring stations over a landline.
But now over 26% of households no longer use landline phone service. And this next company is poised to take advantage of the disconnect.
Recent Price $5.70
Market Cap $86.8 m
Shares Outstanding 15.1 m
Average Volume 21,138
Dividend Yield 7.0%
Telular (WRLS) has two primary product lines. The majority of their revenue comes from their Telguard services. But they also have a side business called TankLink.
Standard home and business security systems use landlines to communicate with a central station. If a security alarm is tripped details are sent to the alarm monitoring company. They’re then able to contact the homeowner and police.
Here’s the problem… More and more people are installing home and business security systems. But fewer and fewer people use landline telephones. That’s why Telular stepped in with a little gadget to facilitate wireless security connectivity.
If an alarm is tripped, a signal gets sent to the cellular network. Then it heads to Telguard’s own communication center. From there the homeowner and emergency personnel are contacted.
Their side business, TankLink, monitors product levels in storage tanks. They primarily market to the petroleum, propane, and chemical industries.
Sales revenue for the company’s most recent quarter was up 22% year over year. Their service revenue, which accounts for over 60% of total revenue, was up over 13%.
Despite the healthy increases in revenue, Telular’s expenses have remained steady. Their cost of products sold went up by a nominal amount… and service costs are actually down 6% year over year.
What’s more, the company has now had 19 consecutive quarters of profitability.
And last quarter, Telular’s net income more than doubled from $960,000 last year to $2.03 million this year.
KEY METRICS ANALYSIS
Trailing P/E 2.3 x
Price / Sales 1.7 x
Return on Assets 6.2%
Insider ownership 10.8%
Short Ratio 1.3 x
Current Ratio 3 x
Total Debt To Equity N/A
In January of this year Telular acquired SMARTLogix. They were the largest value added reseller of Telular’s TankLink systems.
The purpose of the acquisition was to obtain direct relationships with SMARTLogix’s 400 end-user customers. The company can capture a bigger portion of the profits. Telular also decided to leave the SMARTLogix veteran sales force intact.
The initial price of SMARTLogix was $6 million. Although the company could get another $2.4 million in the future if they reach performance goals.
Telular’s management predicts SMARTLogix could add $2.6 million in revenue and $1.4 million in net income going forward.
Joseph A Beatty – President and CEO
Jonathan Charak – VP and CFO
George S Brody – Sr VP and GM of Telguard segment
Jerry Deutsch – Sr VP Manufacturing and Operations
Chart Courtesy of StockCharts.com
WRLS’s 52-week low was $2.33 and the 52-week high was $8.90. Right now the stock is trading at $5.70. The 50-day moving average is near $6.15 a share and the 200-day moving average is at $6.45. The company has a market cap of $86.4 million and 15.1 million shares outstanding.