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Analyst and Fund Manager with almost 20 years investment experience. Coverage includes a variety of industries, with a focus on technology. Particularly focused on value stocks, poorly understood or under-followed situations, and contrarian perspectives. Primarily invest in special situations... More
  • Big 2Q Result From Radcom - Stock Has Significant Upside 4 comments
    Jul 23, 2013 10:25 PM | about stocks: RDCM

    Last Friday we wrote an Alpha-Rich article on Radcom (NASDAQ:RDCM) recommending purchase of this undiscovered gem. Since then, shares are up over 50%.

    Our positive view was validated by the outstanding 2Q results the company reported this morning. We had expected a loss of ($0.05), but the company reported $0.06, and had a spectacular 1700bps sequential operating margin improvement on just $900k of top-line growth.

    For anyone interested, we recommend a read of today's earning conference call - the call was brief, with no questions from callers, suggesting the stock is still on relatively few radar screens.

    We now expect Radcom to earn $0.22 in 2013, vs. our previous estimate of $0.03. We now have 2014/15 at $0.55/$0.80 versus prior $0.40/$0.65. We're hopeful that our new estimates will prove meaningfully conservative, but we think it's prudent to be conservative until we see some additional customer wins announced. Given the strong overall tone of business, we think shares are well on their way to double digits - and believe our $13-$16 price target is very realistic.

    Below is our new model, and below that our previous model. We welcome your feedback.

    New Radcom Model

    (click to enlarge)

    http://

    Prior Radcom Model

    (click to enlarge)

    Disclosure: I am long RDCM.

    Additional disclosure: We conduct thorough research on our ideas, but our views are our own. Please do your own research.

    Themes: Technology, Earnings, LTE Stocks: RDCM
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Comments (4)
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  • ardee27
    , contributor
    Comments (38) | Send Message
     
    VI once again great call.
    Novice question, what convinced you to change - reduce OP cost by 1.4 millions. I think that's the key to upside from 0.40 to 0.55 EPS.
    23 Jul 2013, 11:07 PM Reply Like
  • Valuable Insights
    , contributor
    Comments (485) | Send Message
     
    Author’s reply » They have higher revenue, lower operating expenses, lower interest expense than expected for 2Q. Simply moving forward from there, with REDUCED assumptions for further improvement gets us to those numbers. Realistically, 2014 could be $30 million+ in revenues. They said breakeven is $5 million per quarter. Fall through is about 70%. So at $20 million, they are breakeven. At $30 million, pre-tax should be ~$7 million. There should be no taxes given losses, but assuming 20%, at $5.4 million of net income, EPS is about $0.77, not the $0.55 we have. Based on that, shares could be ~$15-$20.
    25 Jul 2013, 07:31 AM Reply Like
  • tuliptown
    , contributor
    Comments (777) | Send Message
     
    This i coming back onto the radar now that it has fallen some, what do you think keeps the market from recognizing the goods things going on at this company?
    26 Sep 2013, 05:25 PM Reply Like
  • Mitra75
    , contributor
    Comments (34) | Send Message
     
    Yes, I actually had the same question as "tuliptown".
    27 Sep 2013, 09:00 AM Reply Like
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