Even if you don't agree on the cheapness you must recognize the story can change in a hurry.
ELST has evidence of change and potential. That is all. Quick post.
If a company is cheap I will buy and cheap to me is found pretty quickly in the financial statements. Most of my buy decisions are made within a half hour of starting research. When I'm faced with a decision between a few stocks I'll take the one undergoing change because that's what brings out stock price changes.
ELST makes wireless modems. They are rugged devices for machine to machine communication. I'm no expert but I think this field will only grow so the question is can they keep up with technology.
From the most recent 10k:
- BV $2.5M in 2016 vs $2.7 in 2015
- cash $1.5M vs $1.7
- no long term debt
- clean share structure with only common
- 5.1M shares
- no earnings
- rev $1.5M vs $1.6
- fully reporting with the SEC
The latest share price is $0.50, giving a market cap of $2.5M. Up from $0.38 a couple days ago (more on that below).
I bought into ELST about a year and a half ago for 3 reasons:
- BV was about $0.53 vs stock price of $0.38
- recent CEO change due to long time CEO retiring
- stock buyback at $0.38 recently announced
Since then I have just been waiting and the stock has been sitting pretty idle around $0.40-ish. The stock buyback was increased to $250k total and the latest 10Q states, "As of June 30, 2017, $192,206 remains of $250,000 approved by the board. 97,764 shares were repurchased in 2016, bringing the total number of shares repurchased to 152,090." So the buyback is slow moving but again it provides a floor.
Now onto the interesting stuff and the reason for this blog post. Yesterday the company put out their first operations related press release in I don't know how many years. Going back through 8k's over the past 5 years they are all proxy related or quarterly results plus the share repurchase and old CEO retiring.
The company announced a distribution agreement with Molex. Unfortunately they gave no numbers or guidance but it has to be substantial to put out an 8k. I have tried to get info out of the CEO but he's a funny one that will say absolutely nothing other than what's already in filings. I have emailed him a few times with questions and he never gives a valuable answer. All he would tell me is this is a "material event" which is actually telling me nothing because to release an 8k implies as much.
The press release says they "have signed a Master Goods Agreement that allows Molex to sell EST’s full product line as well as integrate ESTeem technology into Molex products. This distribution agreement expands the Molex wireless communications offering and gives customers access to a broader range of solutions." Molex is a major electronic components supplier. They sell connectors and all sorts of individual components, as well as complete systems and I have no idea where ELST fits in. I have emailed more questions to the CEO and expect to receive back nothing.
So here's what I would say. The company has a buyback at $0.38. Price has come up to $0.50 but that's not much of a change and the latest bid is only $0.41. Value given the numbers may be around $0.50 or $0.60. The stock is at a low range and Ted Warren would say this is the time to buy. Just look at this chart. No volume. One of these days it's going to start a march upward. The stock hasn't moved in almost 20 years. We know it's not dropping under $0.38 any time soon.
The risk is revenue continues dropping while the company loses a battle against technology. Revs over the past four years are: $2.2M - $1.9 - $1.6 - $1.5.
What will the company look like a couple years from now? We have a new CEO and a stock buyback. I don't know what Molex adds but maybe it's something and it doesn't take much to influence a $1.5M rev company. The share count is low, the company is small, and I have time. That boring chart is just itching to move up sometime.
disclosure: long ELST