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RDM investment returns top 400% and plenty more to come
Posted by: Gerry Wimmer
10/12/2015
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TOP IDEAS: With a market capitalization approaching $100 million, RDM Corporation (TSX: RC) can no longer be ignored by the majority of small cap funds.




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.


Over that past few years small cap investors who have followed the Investorfile blog know that we have always had a very bullish outlook for the stock of RDM Corporation (TSX: RC - $4.10). As a matter of fact, in our last three blog posts about RDM, we questioned why the broader small cap market had largely ignored this stock that continued to offer a combination of strong value and growth. Case in point: September 2013 – stock up 88% (See: Once a turnaround; now a growth story: More investors should tune into RDM Corporation); February 2014 – stock up 161% (See: For growth investors: What’s not to like about RDM Corporation); February 2015 – stock up 247% (See: Again we say: What’s not to like about RDM Corporation).

In recent years the apathy for RDM’s stock prospects also extended to small cap fund managers who made regular appearances on business TV investment call-in shows. When asked about RDM, one fund manager said, "It was a boring stock going nowhere.” Another fund manager’s comment was, "The stock can get out of its own way” (what ever that means?). To be fair, AGF Small Cap fund manager Peter Imhof had RDM as a top pick on the BNN-TV show Market Call (See: video clip).

Are the blinders for RDM’s stock about to come off? We think so.

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 by four of the top 10 financial institutions in the United States. The Company processes over $600 billion in annual payments and serves 31% of the top 100 Fortune 500 companies including brokerage firms, big box retailers, healthcare and insurance providers, and government entities in the USA.

Since the Investorfile blog named RDM Corporation to its list of Investorfile’s Top Ideas Small Cap Value Stocks at $0.88 (See: RDM Corporation: Cash-rich small cap turnaround, offers value and opportunity) the stock’s returns including dividends have topped 400%.

With investments returns of over 400% to date, what would make the Investorfile blog still believe that there are higher returns still to come? Here are four reasons:

  1. RDM’s market capitalization is approaching $100 million, a milestone that will attract a much wider audience of small cap funds to invest in this Company. This will push the stock to trade at a higher earnings multiple.
  2. Based on its trailing 12-month earnings per share (EPS - US$0.18), RDM’s current stock valuation is not expensive. We take into consideration that the Company reports its earnings in US dollars and the stock trades in Canadian currency and almost one-third of RDM’s market capitalization is derived from its cash holdings.
  3. Recent results and outlook suggest that RDM is in a financial position to increase its dividend rate.
  4. The Company is debt-free and holds about US $25 million (C$31 million) in cash. RDM is uniquely positioned for a stock catalyst event such as a major acquisition or, conversely, a takeover offer.

Given the aforementioned reasons, we look forward to writing our next blog post on RDM Corporation. Why? If history repeats itself (and it has over the last three years), this stock will be trading higher, once again.

RDM has approximately 22 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.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.