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Retalix (NASDAQ:RTLX) has fallen 20% since its April high of $27.50. In fact, it fell in two waves, the first of which lasted from mid-April to the beginning of May, and the second from the mid-May high of $25.80 to mid-June, when it reached an annual low of $20.80. The force driving the plunge in June was the decision by experts at Chicago investment research firm Zacks Investment Research to downgrade their rating for Retalix from ‘Buy’ to ‘Hold.’

So what happened? The analysts writing on this popular site said the motivation for their abrupt change in rating were “second thoughts” about energy prices and their impact on the global economic situation. In their view, “a slowdown in economic growth, together with the continuing increase in energy prices will harm the ability of many retail chains to purchase Retalix’s systems.”

The thing that puzzles me somewhat is the timing. What was it that caused them to suddenly discover the problem of oil prices? But let’s not argue with the analysts at Zacks, who in effect enabled all those people that did not hold Retalix shares to buy them at fairly reasonable prices.

Like Marvell Technology Group (Nasdaq: MRVL), Retalix is always traded at a handsome premium, and I always found it difficult to describe this share in terms of fair prices. The fair prices are beginning to come through now, and I believe that this is an opportunity to add Retalix to the portfolio.

There are two reasons for this. One is that in the view of most analysts, and according to what I have heard and read, Retalix will, in fact, continue its rapid growth. Secondly, the retail management systems field is gaining the level of importance that I predicted it would in the past.

It could be said that the retailer in the 21st century has to be a lot more efficient, economical, ready for change and aggressive. Since we are talking about the same people, there is no way in the world that this revolution can go forward without the IT systems supplied by companies such as Retalix. This market is composed of several giants of the likes of Wal-Mart Stores Inc. (NYSE: WMT), and a lot of medium-sized and small businesses from the corner grocery store to local retail chains, which despite being local can grow to a most impressive size.

Retalix operates in this “small” niche, and quite successfully too, due to its outstanding management and its strong technological knowledge. I think that at its current price of $22, it is still a worthwhile investment, especially in light of the company’s rapid growth and the considerable acquisition bids, which will probably come at some point.

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

Source: Retalix: Enabling the 21st Century Retailer (RTLX)