TTM P/E to the rescue — a good day for Veramark

As it is the case for all postings in this blog, my standard disclaimers apply for this posting.  However, since this posting discusses investments, I urge you to review the disclaimers laid out in the About section with extra diligence. Moreover, even if you have already reviewed these disclaimers in the past, you need to review them again, as they are subject to change without notice.  Do it now, and remember that whatever I say in this blog posting is simply my opinion — it is not science, it is not advice, and it is not an attempt to make you act in any way whatsoever.

8365608321_c3a94ba11d_oYesterday was a good day for Veramark International, with its release of full year earnings for fiscal year 2012 solidly swinging its P/E ratio into positive territory.

I wrote about Veramark Tehcnologies in an earlier posting, noting that the company and its equity, VERA, may be a garage-sales find (to understand what I mean with garage-sales find, see this posting, this posting, or this posting.)

I am probably best described as being a dumpster-diver, constantly seeking equities that has been abandoned by the market for reasons that are understandable, but irrational. I found Veramark Technologies in the dumpster years ago and have been watching it like a hawk, waiting for a turning point, which I could use to rationalize my entry. Yesterday’s earnings release just may be such turning point.

In themselves, the earnings results were excellent:

  • Fourth quarter revenues were $4.0 million (up from $3.9 million in fourth quarter of fiscal year 2011,) full year revenues were $15.3 million (up from 13.9 million in fiscal year 2011.)
  • Net income exploded, reaching $0.03 per share in fourth quarter of fiscal year 2012, compared to a net loss of 0.07 per share in fourth quarter of fiscal year 2011, and reaching $745 thousand, or $0.07 per share, for the fiscal year, compared with a net loss of $1.2 million, or $0.12 per share, for the 2011 fiscal year.

Excellent news in itself, but almost insignificant compared to what it means for investor sentiment. With these earnings figures the company’s trailing twelve months’ (TTM) P/E ratio is restored to a meaningful number, rather than the N/A limbo that it has been in for almost two years, through calendar year 2011 and most of calendar year 2012, and with a rare exception in calendar 2010, for almost three years before then (year-end earnings for fiscal years 2008 through 2011 were -$0.05, -$0.06, $0.02, and -$0.12, with cumulative losses for this period being $2.07 million, bringing the company’s liquidity into crisis territory and increasing the accumulated deficit from $24.1 million to $22 million.

For VERA, the fact that Veramark Technologies’ TTM P/E is definable will be a first step to restoring liquidity and, in turn, grow the per share price.

Excellent news… but — as they say in infomercials — wait.. there is more. Over a very short period Peter H. Kamin, an institutional investor, has gobbled up 1.02 million VERA shares, representing almost 10% of the outstanding shares and handily stabilizing the equity. A decision he will probably not regret given the approximately 15% increase in the per share price between yesterday’s announcement and today.

Based on yesterday’s closing price for VERA of $0.65 per share, I compute Veramark Technologies’ TTM P/E to be 9.28. With today’s per share price of $0.75, the TTM P/E becomes 10.71. Assuming a zero-development scenario for fiscal year 2013, with an average per share price of $0.65, I compute Veramark Technologies’ forward twelve months’ P/E to be 5.4. Well worth the dumpster diving!

Words of caution

As I wrote in the above, whatever I say in this blog posting is simply my opinion — it is not science, it is not advice, and it is not an attempt to make you act in any way whatsoever. In the event that you consider investment in the VERA equity, it will be on your own cognizance and you should consider carefully a number of factors that I did not discuss in this posting, some of which — but by no means all — that are laid out in my original posting on Veramark Technologies.

On that note, it continues to be my intent to examine the company’s history over a decade or so, where, frankly, things went very wrong, resulting in a significant erosion in market capitalization. As I wrote in my previous posting:

The dispositions and actions of the company over more than a decade did not go unnoticed with investors mostly seeking refuge, and the company’s equity being relegated to OTC. Because these dispositions and actions are not only integral to a new potential investor’s understanding of Veramark Technologies and its equity, but also holds valuable general lessons for anyone who are considering any investment into publicly traded company, I will in a later posting attempt to provide more background on the decade. Stay tuned!

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