 TOP IDEAS: With the stock up 161%, RDM Corp. (TSX: RC) is building value
for shareholders by growing earnings, declaring a new dividend and eyeing
acquisitions.
Investorfile’s share price accumulation target of $1.35 for RDM Corporation was
reached on November 22, 2012. For the record, we do not revise share price
targets for our Investorfile Top Ideas - Small Cap Value Stocks. We have
positioned our blog to be one of the first providers of a pragmatic perspective
of a small cap company stock's potential worth, where there may be uncovered
value that has been largely overlooked by the investment community.
When asked to comment about RDM Corporation (TSX: RC - $2.30), Peter Hodson, a
well-respected Canadian small-mid cap investment guru from 5i Research, said on
the Business News Network (BNN) that RDM has made a powerful statement to small
cap investors by declaring its first quarterly dividend payout (See: BNN video
clip). We agree with Peter Hodson and we predicted that RDM would
generate shareholder value-enhancing announcements (a first dividend) in 2014.
(See: Investorfile strikes big on 3
small cap predictions in 2013; declares 3 more for 2014 - Carry forward
prediction #1).
RDM Corporation is a provider of Remote Deposit Capture (RDC)
technology: specialized software and hardware products for electronic payment
processing of digital images of cheques. RDM payment solutions are utilized at
five of the top 10 financial institutions in the United States. The Company
processes over $600 billion in annual payments and serves 32% of the top 100
Fortune 500 companies including brokerage firms, big box retailers, healthcare
and insurance providers, and government entities in the USA.
So for investors what is next for RDM?
To see forward, we look back first.
It was 5 months ago when the stock was already up 88% (as one of our Top Ideas)
when we suggested that small cap investors should pay much more
attention to the growth story occurring at RDM (See: Once a turnaround; now a
growth story: More investors should tune into RDM Corporation.)
Now the stock is up 161%. Guess what? We
still believe RDM shares are in the early stages of value appreciation.
Here are three reasons why:
- RDM stock is still reasonably priced for a technology growth company.
For RDM’s fiscal 2014 Q1 results revenues grew 21% to US$5.8M, adjusted EBITDA
was up 73% to US$1.1M and EPS grew to US$0.04 per share. Annualize Q1 results
and RDM’s stock trades at Enterprise Value (EV) / EBITDA ratio at 6 times,
which is inexpensive.
- Expect more shareholder value-enhancing announcements from RDM.
Recently the Company declared its first annual dividend of $0.04, to be paid
out quarterly. In the future, count on annual dividend rate increases. Also,
RDM has stated its intent is making use of the Company’s available liquidity
(US$19.3M in cash holdings) for acquisitions to accelerate growth.
- RDM market capitalization is on the
rise.
A higher market capitalization attracts a wider investor audience to the
Company. More institutional investors will buy RDM stock which will drive up
share valuation.
We conclude this RDM blog post like our
last RDM blog post by saying: Despite the increase in the value of RDM
shares to date, the appreciation potential for this Company’s stock price is
still stronger than ever.
Will we need to repeat this again in our next RDM blog post?
RDM has approximately 21.3 million shares outstanding.
RDM Corporation website: www.rdmcorp.com
Author's Ownership Position TSX: RC - Long
Read Disclaimer:
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile.com is not engaged in an investor relations agreement with RDM
Corporation nor has it received any compensation from RDM Corporation for the
preparation or distribution of this article.
The author of this article has acquired and may trade shares of RDM Corporation
through open market transactions and for investment purposes only. |
