ActivIdentity's Balance Sheet Makes it All Worthwhile (ACTI)

ActivIdentity (ACTI) provides “software and hardware products that authenticate the user to a network, a system, applications, or a facility.” The company allows individuals to use smart cards, tokens, biometric devices, mobile phones, and PDA’s to confirm their identities before granting access to computer networks or physical locations.

Security strikes us as a growth sector, but we don’t have any particular insight into the company’s products. We will note though, that ACTI customers include British Telecom, BankOne, Visa, ABN Amro, Hewlett-Packard, and even the US Department of Defense.

What caught our eye at ACTI was its balance sheet and insider buying. At March 31, 2006 the company reported current assets of $155 million, almost all in the form of cash and short term investments. ActivIdentity has no long term debt and only $27 million in total liabilities. The price to book ratio is 1.13 which is particularly interesting because company assets are highly liquid. ACTI’s market cap of $196 million represents an approximate 53% premium to current assets net of all liabilities.

CEO Jason Hart apparently thinks his company is a buy. He started scooping up shares in November of 2005 and reported his most recent purchase of 15,000 shares last Wednesday. Hart has bought over $1 million worth of shares in the past few months. For details on his transactions, see this site.

Clearly there’s more research to be done before investing in ActivIdentity, but we feel we’re off to an encouraging start.

ACTI 1-yr chart: