| Sand
Technology (SNDT) -- An Undiscovered Micro-Cap Stock That is Now
Trading Near its Cash Value |
Published: May 17, 2005
In my weekly premium
newsletter -- Undiscovered
Micro-Cap Gems -- my goal is to introduce readers to a variety of
promising micro-cap investing ideas that they may wish to consider for
their portfolios. In doing so, I generally look for small, neglected
companies that have been overlooked by conventional Wall Street sources.
I also look for undervalued firms that are trading at a steep discount
to their intrinsic value. Many of these individual investment ideas have
the potential to deliver triple-digit percentage gains in the years
ahead.
Below you'll find an
in-depth look at one such investing idea that I introduced my readers to
last weekend. To gain access to dozens of similar investing ideas
each and every week, you'll need to subscribe to my Undiscovered
Micro-Cap Gems service. In the meantime, I sincerely hope you enjoy
today's sneak peak at one of my most recent micro-cap investing ideas...
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Sand Technology (SNDT, $0.71)
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Sand
Tech. (SNDT)
Sector = Technology
Industry = Computer Software
Market Capitalization = $9.1 mill.
Enterprise Value = $2.5 million
2004 Revenues = $5.3 million
2004 Gross Profit = $2.8 million
2004 Growth = -82.2%
Insider Ownership = 25.9%
Institutional Ownership = 1.9%
Insider Activity (TTM) = Neutral
Enterprise Value/EBITDA = N/A |
Sand Technology is undergoing a
major transition. Previously, the firm derived most of its revenues from
the sale of computer hardware products. The company has switched gears,
though, and is now focused on software sales. This transitional period
explains the sharp drop in revenues SNDT has seen in recent years.
Going forward, the firm has
decided to center its business efforts on the development, marketing and
servicing of its SAND Analytic Server. This specialized software allows
non-technical users to make database inquiries and analyze data without
support from technology professionals. Business users can thereby more
effectively manage data with reporting and analysis tools. Customers in
a variety of sectors are already using the software to support a broad
range of vital business functions, including customer resource
management (CRM), e-commerce, quality control, and supply chain
management.
We were first attracted to the
company based on its potential break-up value. Currently, the stock has
$0.65 per share in cash and another $0.22 in receivables. With total
liabilities of $0.26 per share, SNDT has $0.61 per share in working
capital. This is impressive considering the stock only trades at $0.71.
Keep in mind, though, the company has been bleeding about $2.2 million
in cash per quarter, or roughly $0.17 per share. In essence, SNDT is in
a race to gain market acceptance of its products before its resources
are depleted.
On a positive note, although
the firm's revenues and earnings declined (on a year-over-year basis) in
the second quarter, those measures both improved on a sequential basis,
as sales rose +18% over the prior quarter and net losses narrowed by
20%. And going forward, management has a fairly optimistic outlook,
indicating that its recent positive sales trends should continue at a
steady rate. At this time, we believe the company must double its sales
in order to report breakeven bottom-line results. The race is on, and
only time will tell if SNDT's business model will work before the
company's resources are exhausted. Despite the high risk, the stock has
merit at these low prices as a micro-cap value play.
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Important Note: The above article
was merely a small excerpt from a recent issue we sent to subscribers of
our premium value investing service -- Margin-of-Safety
Investing. In each issue of that newsletter, editors Nathan
Slaughter and Paul Tracy deliver an in-depth look at a variety of other deeply discounted
stocks that should provide investors with a solid margin of safety at
current prices. To receive your copy of our most recent issue of Margin-of-Safety
Investing, as well as other guidance similar to this twice per
month, you'll need to subscribe to this publication. To learn more,
please visit:
https://www.streetauthority.com/subscribe-msi.asp
Thanks for reading!
|
Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
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