Nighthawk Numbers: Theme Unch’d: Lower Risk
When looking at any investment in any class there are always two parts to the formula- risk and reward- or upside vs downside.
Folks are continually canvassing my thoughts on NIHK- most want to know when the stock will have another of its annual run ups that really excite the inner “trader” in us all.
That’s the upside. I had a chance to review NIHK’s recent 10Q filing for the September quarter, and I was struck by one of the key themes of owning NIHK- the other side of the equation- the downside. For a stock which likes to trade between $.08 and $.12, there doesn’t appear to be a lot of downside from the fundamental side. There’s always market risk, but the company is delivering growth as promised.
Revenues for the quarter came in at $360k- not a big number, but a growing number. In fact, it was NIHK’s highest quarterly top line in four years, and 59% ahead of the same quarter in ‘06.
Losses were way down from previous years, and shareholder’s equity continued to show improvement as well. In short, they are getting traction with their remote disconnect products in the Utility industry.
It is also important to recognize that the recent acquisition of the set top box business, which promises to deliver millions in revenues, is not reflected in this quarter. When we see their year end audited numbers, the balance sheet will have undergone a complete transformation. The top line for Q4? it depends on whether they deliver set top box orders in December- if they do, they will have an all time record quarter.
As you can see from the chart, $.08 has been a low risk level to accumulate NIHK over the past year. Can it drop below that level? Sure. Perhaps the stock wants to trade between $.08 and $.12 for the next six months. I don’t know for sure.
However, I do know the company is delivering on the risk side of the equation. As their numbers improve quarter after quarter, the risk side of the equation diminishes. The stock seems to have upside around big events the company has pulled off in the past that have promise for investors. They are due to pull another rabbit out of their hat in the not too distant future.
With the market getting absolutely hammered over the past month, there is more of a buyers strike than a sell off in the stock. A great time to accumulate at the right price.
Comments and questions are welcome.
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I’m a bit scared now-largest order in company’s history and the stock closes lower than previous day.
Editor: Then sell your shares. There’s no reason to be scared. It’s just the stock market, and it’s just an $.08 stock. Best quarter in years followed by the largest order ever- and shipping on the set top boxes- sounds like a company headed in the right direction. Now, if the stock would just follow in kind. Too bad the market has been so sloppy in a normally robust time.
Comment by DFR — 12/5/2007 @ 5:04 pm
Interesting that we are seeing such huge deals and not a lot of movement. The volume was up today, way past average. The news this morning was very good to see, almost as if they will have recurring revenue on every new rental in Smyrna. I thought it was interesting when Doug said they would use it as a “case study”. This could very well lead to big things. With only about 3 weeks left in this quarter hopefully we’ll see one more deal even if it’s a small time order. This is gearing up to explode next year. The revenues should be enormous from todays order combined with all the set-top boxes for this quarter. With people buying again in the new year, hopefully good turnout this Christmas and gas prices lowering to somewhat normal levels, and maybe one more big news story, this thing could propel way past its high this year; maybe even into the .4-.5 range.
Editor: Record new size orders just after a record quarter. Sounds to me like a company that’s clearly moving in the right direction. When you least expect it, this stock will run.
Comment by ed — 12/5/2007 @ 1:39 pm
.07 who would of thought it with all the good news. What do you think is keeping this stock from going up and what do you think the future for this stock holds. What would you be doing with your shares if they were free trading now?
Editor: I believe I would hold the majority for a more favorable market environment unless I needed the money. As I have been saying, the company is becoming less risky, and therefore easier to hold for the long term.
Comment by Sara — 12/3/2007 @ 11:16 am
nighthawk looks as though it really has some great growth potential. but what is the potenial market value for there products ?? does it hurt the company that there are so many shares outstanding? do you think there could be a reverse split coming? how would that effect the company ? it seems every time i look theirs more shares outstanding!
Best regards
Ron
(share holder)
Editor: Those shares are how they have funded their losses, which does impede the stock price. I believe we are a long way from a reverse split. It would be a major negative at this point in time. Let’s see what happens when the set top box deliveries get rolling. That business could change everything about the company.
Comment by Ron — 11/27/2007 @ 5:58 pm
Good article. But it’s almost a historic thing with nihk that it will go back down to around 0.065 before it can go back up. That area seems to be a bottom on this stock. Just speculation on my part.
Editor: As good as anyone’s- my point- this stock gets less risky all the time. Now, if we’d just have another big run to keep everybody happy.
Comment by Rob A — 11/27/2007 @ 11:12 am