SmartPros Could Be a Smart Move

SmartPros (SPRO) provides learning and training solutions for professional markets, including accounting/finance, legal, engineering, securities and insurance, as well as information technology (IT) professionals. The company also provides corporate governance, ethics and compliance training for the general corporate market. It offers off-the-shelf courses and produces custom-designed programs with delivery methods suited to the specific needs of its clients. Its customers include professional firms and companies of all sizes. The company's e-marketing and e-commerce business sells ads on its website and develops newsletters and marketing programs for clients.

Depending on which numbers you choose to believe, unemployment currently sits somewhere between 9% and 14%. In these uncertain times I believe that companies such as SmartPros should do well as unemployment figures soar. Those of us lucky enough to be employed will most likely be looking for ways in which to become more valuable to our employers in order to retain our positions, and those of us who have suffered the loss of their job will inevitably be looking for ways in which to stand out from the crowd in the competition for the limited openings available. This is where SmartPros comes into its own. The company offers courses in the very skills that many people will be looking to add to their resumes.

The company reported excellent figures for 2008 and I expect a similar trend to be observed in 2009. As of December 31, 2008, the company had approximately $6.63 million in cash and cash equivalents, $5.6 million in deferred revenue, stockholders' equity of $12.1 million, and no debt. SmartPros trades at a P/E of 8.1 and a price/book of 1.17 with a current ratio of 1.36 and a gross margin of 57.9%. Also, the acquisition of Loscalzo last year appears to have been a smart one, leading to a number of cost cutting measures and an increase in ROIC.

In the company annual report Chairman and CEO, Allen Greene stated “We are proud to have finished the year strong and are looking to carry that momentum into 2009.” “We continue to show revenue growth year-over-year and our operating profits were at an all-time high. Further, we believe that operating profit and EBITDA numbers provide the best comparative narration because it removes the influence of interest rates and the tax benefit treatment.” Greene holds almost 5.6% of the company stock and is one of several insider holders. Also of note, real estate investor Zohar Ben-Dov announced a 10.5% stake in the company in March this year.

The company boasts a large course library and a large customer base, however, it is a competitive industry with a relatively low barrier to entry, meaning that the company has to continually strive to protect its niche. This being said, I believe that SmartPros represents good value at its current price of $3 a share and would be looking at a 12-month target price of around $5.

Disclosure: At the time of writing the author did not hold shares in SmartPros Ltd (SPRO).

Comments

[DmytrenkoArtem:]

looks like promoting stock/company, not analysis. so i will not buy SPRO :-) . Or will check a lot of info by my hands. Oh.. We can push price of this stock huge! we saw many days when daytrading volume was 200 shares on it :))))

Jun 09 08:47 AM

[sticktoitiv...:]

"looks like promoting stock/company"

Are you long this, Greg? If you are just disclose it on the bottom of the article, it's not a sin to own a stock you know. People consider you owning a stock you write about not only as biased, but a sign of conviction too.

Jun 09 01:07 PM

[Greg Parker:]

Thank you for your comments. Just to clarify - I have no position in SPRO - as my disclosure clearly states at the bottom of the article.

While I do like the company, and will continue to keep a watch on it, the lack of liquidity is not something I feel comfortable with at this point. I will continue to write about smallcap companies that I believe represent potential investment opportunities, particularly value stocks and those that are not receiving a lot of coverage elsewhere. My aim when writing is simply to present ideas for further investigation, you should always do you own research before investing, no matter who may be recommending something to you. You are, of course, free to take what I write and do with it as you please, I always disclose my positions in my articles.

Thanks again for reading.

Jun 09 07:34 PM

[michaelandr...:]

I do hold 600 shrs or SPRO and have held many more in the past and am always looking to add to my position.

You fail to mention the low PE is due to their not paying income taxes, and if memory serves, in some Q's there is actually a tax benefit assisting EPS.

But I do like (not love) the stock at the current price, its the PE is not comparable to tax paying entities.......

Jun 23 11:32 AM