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Looking through the list of top % gainers on the NYSE today, I came across Par Technology Corporation (PTC), which, as I write is trading at $22.17, up $.92 today, or 4.33%. I do not, nor do any of my family members, have any shares or options on this stock.
According to the Yahoo "Profile" on PTC, the company "...operates through its subsidiary ParTech, Inc., which is a provider of management technology solutions, including hardware, software and professional services to businesses in the hospitality and retail industries."
As I always point out, the first "screen" that I like to use in picking a stock for the blog is to check the latest quarterly report. On April 27, 2005, Par reported 1st quarter 2005 results. Revenue grew 29% to $48.8 million from $37.9 million last year. Quarterly income grew to $1.3 million or $.14/share this year, from $736,000, or $.08/share in the same quarter last year.
How about longer-term? In other words, it is great that they had a nice quarter, but can the company continue to deliver outstanding results? The best approach that I have found, is to examine the past five years through Morningstar. Hopefully, most companies that do well this quarter and have done well the past several years will continue to do well. Now as you know, past results are NO guarantee of future results, but imho, they are about as good an indication as you can get.
Checking the "5-Yr Restated" financials from Morningstar.com on PTC, we can see the nice "ramp-up" of revenue fromn $101.5 million in 2000 to the $174.9 million in the trailing twelve months (TTM).
Earnings also show steady growth from $.04/share in 2001 to $.61/share in 2004.
Free cash flow is positive and growing from $3 million in 2002 to $18 million in 2004.
The balance sheet, as reported on Morningstar.com, also looks nice with $8.7 million in cash and $69.0 million in other current assets, plenty to cover both the current liabilities of $45.2 million and the $3.0 million in long-term liabilities with current assets left over.
What about "valuation" questions? For this information, I find the Yahoo "Key Statistics" page on PTC very helpful!
Here we can see that the market capitalization of this company is a small $197.82 million. Many people would put this in the "micro-cap" range.
The trailing p/e isn't bad at 33.08, the forward p/e (fye 31-Dec-06) is estimated at 20.09, and thus, the 5-Yr PEG is also estimated at 1.15. The Price/Sales ratio is nice at 1.02.
As I have written elsewhere, and as Paul Sturm has written in Smart Money, the Price/Sales ratio is only helpful in regards to relative valuation within an industry group.
Par Technology (PTC) is in the "Business Equipment" industry. Other stocks in this group, include Nam Tai Electronics (NTE) with a P/S ratio of 1.7, Diebold (DBD) with a P/S ratio of 1.5, Herman Miller (MLHR) at 1.4, HNI Corp (HNI) at 1.3, and only Xerox is lower than PTC at 0.8. Thus, the valuation of this company actually looks quite attractive!
Also from Yahoo, it is reported that there are only 8.95 million shares outstanding with 4.90 million of them that float. As of 4/8/05 there were only 33,000 shares out short representing 0.67% of the float or only 0.75 trading days of volume. This doesn't look significant to me.
No stock nor any cash dividends are reported on the Yahoo page.
How about "technicals"? In other words, does the chart look promising? I have found that the point and figure charts from Stockcharts.com are the most helpful. Looking at the Stockcharts Point & Figure Chart on PTC:
we can see that this stock was actually moving lower between December, 1999, when it peaked at around $6.00, to a low of $1.75, which was hit in March, 2001. Since that time, the stock has traded steadily higher in a very strong chart pattern. Currently, the stock appears to be right at its highs at the $22.00 level. If anything, the chart looks a bit over-extended, but I wouldn't be fighting this chart pattern!
In summary, this stock looks attractive to me because of the nice price move today, the great earnings report released last month, the five year record of growing revenue and earnings, free cash flow, and a solid balance sheet. Valuation looks reasonable, and the chart is gorgeous! What is there not to like? On the downside, this is a tiny company, and in my experience, tiny companies are subject to considerable volatility.
Besides, I am not in the market to buy anything at this time. I am sitting on my hands, waiting for one of my current investments in my trading account to hit a price target so that I can sell a portion and add a new position!
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