The Future Of Software…

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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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