Ackroo
The company filed it’s quarterly update late tonight
- Press release expected tomorrow
- Gross Margins held steady at 65% which suggests organic growth
- A 71% decrease in operating losses. Operating losses remained in the $20‐$30k per month range similar to Q1 despite increased costs
- Ackroo is still losing money and may have to raise money again with a share sale. But the overall numbers are positive: revenue is growing and margins are stable.
I expect the shares to move higher tomorrow, but a pullback below 21 cents would be a buying opportunity. The company is still on track to reach profitability later this year.
Patient Home Monitoring
Shares surged more than 25% this week. I’ve been investigating and can’t find a reason for the sudden move in the stock. I did look at the financials and business prospects and came up with the following …
- Based on my stabilized earnings estimate of approximately $20-million, I value the shares at 55 cents.
- New Management now owns more than 30% of the company (approximately 80-million shares) after replacing out the old management team and taking over operations. I think they’re taking advantage of the price collapse to pick up the company for a very cheap price. I also believe New Management pushed out all the bad news early in their tenure (writedowns, business shutdowns, medicaid price cuts) to take the stock price hit now and start the process of rebuilding investor confidence without worrying about releasing more bad news later on.
- Stabilizing the business — which is a mish-mased together mess — will take about 2 years. There is no reason for the shares to move higher in that time unless the company is sold. Simply: Margins are not as large as previously promised because of Medicaid cuts and restructuring costs. Also, the growth projections of the previous management team are unrealistic. This company should eventually become a low-growth business with average profit margins. Because ongoing maintenance costs are low, that shouldn’t stop PHM from generating decent cash flow.
- PHM has manageable debt levels. There is no risk of bankruptcy.
Bottom line: The shares are cheap but will stay that way for a while. You could make really good money buying below 25 cents, but you’ll have to be prepared to hold for at least 2 years and watch PHM hover around current prices.
