Reader Request: NetSol Technologies (NTWK, INTC, DCX)

The Microcap Speculator submits: Reader Eric requested that I take a look at NetSol Technologies (ticker: NTWK). Technically, I like the chart. It shows a long base, a recent spike and a pullback to the breakout point.

Fundamentally, the picture also looks good. NetSol provides software for automotive financing and vendor financing, as well as other IT solutions. Its customers include DaimlerChrysler (ticker: DCX) and Intel (ticker: INTC). NetSol recently reported its first profitable fiscal year, and showed a 116 percent increase in revenue. Management also guided revenues to grow to $19-20 million in fiscal 2006, versus $12.6 million in fiscal 2005. NetSol did not give bottom line guidance, but this kind of revenue growth usually boosts earnings as well.

I am not aware of any comprehensive study on the subject, but my personal experiences indicate that companies with a long history of losses are generally good buys when they first shift into profitability (as long as it is real profits not a b.s. gain on sale or something like that).

Overall, I think NetSol looks good. I may take a position.

DISCLOSURE: I have no position in NTWK. Not a recommendation to buy or sell any security. For informational and educational purposes only.

NTWK 1-Yr Chart