April 20, 2012 PSW Staff |
products for wireless and advanced communications industries and markets its products and services worldwide under the Boonton, Microlab and Noisecom brands. Its complementary suite of high performance components and instruments includes RF combiners and broadband combiner boxes for in-building distributed antenna systems deployments, RF power splitters and diplexers, hybrid couplers, peak power meters, signal analyzers, noise modules, precision noise and generators. The Company serves both commercial and government markets with workflow-oriented, WiFi, WiMAX, satellite, cable, radar, avionics, medical, and computing applications. Wireless Telecom Group is headquartered in Parsippany, New Jersey, in the New York City metropolitan area, and maintains a global network of Sales and Service offices for excellent product service and support. Not only has this company performed quite well over the last year and frankly, the last five years, it is poised to do even better in the coming months and years. Focusing on the 4G market and quickly retiring old technology, a strategy that is coming to full fruition now, has accelerated and will continue to accelerate this company's revenues, margins and earnings for at least the next couple of years. With only a $30 million market cap, we think that Wall Street just hasn’t noticed this company yet, but when they do over the next quarter or two, there is absolutely no reason the stock won't climb significantly, perhaps doubling or tripling in quick fashion. Wireless Telecom Group has seen retained earnings climb significantly over the last five years. The company has over $12 million in cash and only $2-3 million in debt. Trading below book value, the stock looks quite undervalued, but not so much as to present an ominous signal. In fact, the stock has already shown some very solid performance over the last six months. For the fourth quarter of 2011, the company reported net sales from continuing operations of $7,209,000, compared to $6,636,000 for the same period in 2010, an increase of 8.6%. For the twelve months of 2011, net sales from continuing operations were $26,823,000, compared to $24,564,000 for the prior year, an increase of 9.2%. For the fourth quarter, net income from continuing operations was $716,000 or $0.03 per diluted share, compared to net income from continuing operations of $358,000, or $0.02 per diluted share for the prior year period, an increase of 100%. For the twelve months, net income from continuing operations was $2,430,000, or $0.10 per diluted share, compared to net income from continuing operations of $1,015,000 or $0.04 per diluted share for the prior year, an increase of 139%. Paul Genova, CEO of Wireless Telecom Group, Inc. stated “With the advent of 4G and LTE, broadband capacity and coverage is expected to grow significantly over the next few years and we have targeted this market as a significant growth segment on which to focus the Company’s resources. Accordingly, we have revised our financial reporting to include two reportable segments, network solutions and test & measurement. The increase in consolidated revenue for 2011 was the result of strong demand in our network solutions segment where revenue increased 50% to $12,968,388.” The stock saw some very substantive insider buys late last month totaling almost 50,000 shares. With less than 25 million shares outstanding, insider ownership of 34% coupled with institutional ownership of 23% makes the float of a mere 15 million shares another reason why we believe this stock could take off in a heartbeat. Institutional ownership has increased by 4% or 235,000 shares between the last two quarters, and as of the end of March, only about 10 thousand shares were held short. Over the last ten years, the number of shares outstanding only accelerated once between 2004 and 2005 from 17 million to 25.6. There are actually 1.11 million shares less than that currently. We believe a buy anywhere below $1.25 would make for a great starting point with this investment, of course with a very small percentage of ones overall portfolio. A stop loss perhaps just below a dollar would be a wise move, and having a profit target somewhere above $2.00 and maybe even $3.00, should earnings continue to accelerate, would not be a stretch. Our best guess for a time horizon with this trade would be anywhere from 2-6 months. The company's next quarterly report is expected to be out in the middle of May. |
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