March Networks Trading at Cash; Likely Buyout Candidate

March Networks (MNTWF.PK) is a video surveillance company. More specifically, it manufactures the digital video recorders (DVRs) used by enterprises to store video generated from surveillance cameras. It recently introduced video intelligence software, which can analyze what's happening in the video.

I believe this stock should be bought here. The stock trades both in Toronto [MN.TO] and the U.S. (MNTWF). MNTWF has $5 per share in cash and $5.70 in working capital. The stock is trading at $5.50.

The problem: the company's largest customer is Wal-Mart (WMT), which has accounted for roughly 50% of sales. WMT decided to add a second vendor, which has slowed MNTWF's sales to WMT. That's what took the stock down.

The solution: expand the product base and the customer base. MNTWF now has a strong mobile-DVR market, which targets the transportation industry (putting DVRs on trains and buses), and is rapidly growing its business at banks, both in the U.S. and internationally. The CEO recently bought stock, perhaps a sign that a bottom has been reached.

The bottom line is that owning a stock at cash, especially when recent quarterly losses have been small and former profitability large, makes sense. Also, the biggest shareholder is Terry Matthews, who has funded and sold more than a few public companies. There is consolidation in this space, so a buyout is more than a bit likely.

Disclosure: Author holds a long position in MNTWF.PK