I.D. Systems (IDSY) is a relatively small company that has been in and out of my portfolio several times now. Through previous articles, I have summarized highlights capturing the obscure opportunity IDSY's fundamentals and keen technology offer investors. I am reiterating a buy for IDSY on the basis of new catalysts and current valuation. This article will serve as an update informing investors what is new as well as what to watch out for over the next few months.
IDSY serves its customers through providing asset management systems for the sole purpose of providing security, tracking, and monitoring services for the management of high-valued assets to both private and public corporations. As outlined below in figure 1, you will see IDSY is currently trading at approximately $6.25 a share and given nearly 12.1 million shares are outstanding, the market capitalization is roughly $76.1 million.
Figure 1: IDSY Five Year Price Graph from TD Ameritrade
Five reasons IDSY's is buy at current valuation:
- IDSY just recently launched "I.D. Systems Analytics", which essentially is designed to serve corporate managers with a "birds-eye" view of operating activity for industrial vehicles that can be monitored across multiple facilities. Please download the Analytics product sheet for further detail. The real value this product will add has yet to be priced in to IDSY's current market value.
- As of September 2012, it was reported more than half of the current fortune 200 companies have invested in I.D. Systems technology to utilize IDSY's asset trackers on lift truck fleets. In addition, IDSY contracted with several large organizations with fleets exceeding 5,000 units.
- In November, IDSY entered into an amendment to expand the existing agreement with Wal Mart transportation. The agreement is expected to generate between $7 to $10 million. The terms of this agreement extend through December 31, 2014.
- For being a small cap technology company, IDSY presents relatively little risk to investors through its holding period returns. Relative to the S&P, I computed an average beta of 1.5, which is only slightly above the market beta of 1.
- Looking forward into FY 2013, investors should keep a close eye out following the ProMat taking place January 21-24. ProMat is an expo-style event that serves as a premier showcase for technology specializing in supply chain and logistics that is designed across America. Attendance at this event will be enormous and will provide a great marketing opportunity for IDSY's products.
While normally a small cap company would be considered a highly speculative play, solid fundamentals have enabled IDSY to reveal a small level of firm-specific risk. IDSY offers a product that is increasingly exhibiting a higher level of demand across manufacturing companies nation wide. I will provide a follow up article modeling how the expected cash inflows from IDSY's long-term contact with Wal-Mart (WMT) will impact its valuation.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in IDSY over the next 72 hours.