Market Overreacts to Retalix Accounting Issues

| About: Retalix Ltd. (RTLX)

Retalix (Nasdaq: RTLX) has been positioned by analyst firm Gartner in the Leaders Quadrant for Point-Of-Sale applications. While this field is known as “point-of-sale support,” the company actually develops platforms for streamlining retail systems.

In essence, what Gartner says is that retailers have stopped looking at point-of-sale support as a platform from which to introduce for savings or cost cutting, and now see it as a tool that can help them with customer relations. Convenience stores in the US, minimarkets, and even coffee shop chains, have long since realized that putting the entire chain on the network is vital, since anyone who doesn’t have such systems simply gets left behind. Retalix offers a technological alternative that is probably the best around, so it has tremendous growth potential, since this niche is still in its infancy.

Much to my regret, the company has recently slipped in the one area I least expected it to: its accounting. Apparently to meet forecasts, or just out of sheer lack of concentration, someone over there got it wrong, or perhaps the auditors were at fault. Regardless of what happened, the market punished the stock, bringing it down to the fair price of $16. This was an overreaction on the part of investors and created a buying opportunity. The market apparently noticed this too, and as a result, the stock rallied slightly at the beginning of the month. Retalix is expected to post a net profit of $21 million on $220 million sales this year, and therefore, it is a company definitely worth watching for more opportunities of the kind that presented itself two weeks ago.

RTLX 1-yr Chart

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