Ezenia! -- A Smallcap Worth a Closer Look (EZEN)

| About: Ezenia Inc (EZEN)

Nashua, New Hampshire based Ezenia! Inc. (OTC:EZEN) “develops and markets products that . . . allow individuals and groups, regardless of proximity constraints, to interact and share information in a natural, spontaneous way—voice-to-voice, face-to-face, mouse-to-mouse, keyboard-to-keyboard flexibly, securely and in real-time.” The company has some legacy videoconferencing products and newer applications that defense agencies have taken a liking to due to tight security features.

From a distance, EZEN has numbers that can knock your socks off. According to the data at Morningstar.com, Ezenia has a trailing 12 month ROA of 30% and an ROE of 69%. It also has an operating margin of 28.5% and a P/E ratio of 9.5. The balance sheet has no long term debt and about a quarter of the market cap is cash. With a market cap of only $40 million, the company could be an undiscovered gem and may have lots of potential to grow.

Among the risks the company lists in its filings is “dependence on major customers.” The 10Q fails to quantify this risk but it does state:

“While we are focusing efforts on broadening our customer base, sales to a relatively small number of customers within the US government, specifically within the DoD and the intelligence community, have accounted for a significant portion of revenue. . .

Our operating results could be materially and adversely affected if any present or future major customer were to choose to reduce its level of orders, were to change to another vendor for purchases of a similar product, were to realize a reduction in approved funding for collaborative technologies, or were to delay paying or fail to pay amounts due to us.”

We don’t know much else about the company but it seems worthy of a closer look. As always, please do your research before investing.

EZEN 1-yr chart:

EZEN 1-yr