A quick equity screen this morning revealed an excellent investment opportunity. The constraints used in the screen were:
- Market Cap $300 Million to $2 Billion
- P/E greater than 10x
- ROE greater than 10%
- 30 day Relative Strength Indication within 20 to 30
- Average volume traded above 50,000
- Institutional holdings greater than 50%
Value Click Inc (VCLK) is a digital marketing company that provides specialized advertising services to a wide range of customers. VCLK's products enable marketers to interact with customers through mobile and web applications. In addition, they have multiple technologies that can be utilized by marketers to reach their target market through multiple channels.
According to Ameritrade their array of products and services can be categorized as "those that enable customers to address all aspects of the digital marketing process, including strategic planning, ad creation and optimization, media sourcing, and reporting and analytics. Its customers include direct marketers, brand advertisers and advertising agencies that service these groups. ValueClick operates in four segments: Affiliate Marketing, Media, Owned & Operated Websites and Technology."
Figure 1: VCLK's YTD Price Graph
Looking at the graph above you will see that shares of VCLK are trading at roughly between $16 and $17 per share. Their market cap sits at approximately 1.23 billion dollars with 75.09 million shares outstanding. The average volume traded on a daily basis is about 59,000 shares.
Figure 2: Valuation Metrics
One of the things I like about this company is their P/E ratio of 12.23, yet a low firm specific beta of only 1.52. Their ROA, ROE, and ROI speak for VCLK's ability to turn over a profit. Within the past month analysts have initiated coverage on this security placing price targets ranging from $20 to $25 per share. These price targets are based upon projected revenue growth for Q4 and FY 2013. Analysts assume they will maintain the same very low levels of debt, while augmenting revenue. This will yield to be beneficial in regards to valuation.
Figure 3: VCLK's Ownership
Insider transactions have fluctuated about 14% over the past six months, however more importantly consider the extremely high amount of institutional investors that own this stock. One potential reason for such high institutional ownership in this security is the possibility of VCLK being targeted for an acquisition. The advertising industry is highly competitive, and big companies such as Facebook (FB) seem to have particular interest in some of the same customers.
Figure 4: Historical Returns
Keep in mind the beta value I discussed above while taking a look at VCLK's historical returns. VLCK's returns have been steady. As you will see, they have outperformed the S&P over the past three years, yet have maintained a relatively low beta value in comparison to the market beta.
Figure 5: Revenue vs Earnings Growth
This comparison between revenue and net income shows the relationship between the two and how they grow overtime. From looking at this graph you will notice after the financial crisis in 2009, beginning in 2010 revenue and net income started to grow at similar rates. In 2012, it is evident their sales increased because revenue begins to show a steeper slope than net income.
VLCK has historically outperformed the market, after a recent decline in their security price valuation is supportive of an upward trend. Earnings are steady and the company is profitable. Analysts are quickly giving this stock more attention. Overall, VCLK is a stable company that provides a high potential upside for investors.
Source: All data for this analysis was retrieved from TD Ameritrade, YCharts, and FinViz.