PNWIF- long a following in the OTC Journal, finally delivered a strong quarterly performance. Can you spell “too little too late” as far as the stock price goes. We needed this a year ago.
In case you’ve forgotten, PhotoChannel provides and ecommerce solution to retailers for photo finishing. You upload your digital images to a web site, then go into the store and pick up your prints in one hour.
They landed Costco in 2008, and spent about 9 months implementing the infrastructure to handle the volume, along with CVS pharmacies, WaMart Canada, parts of China, and other large retail chains.
PNWIF only provides the web interface, and make a few cents for every print. Q1 of their ’09 was the 4th calender quarter of the year, and their first profitable quarter in some time.
Revenues came in over $7 million at nearly $7.2. Profits were about $300k, which doesn’t represent a great margin. However, the company netted an additional $700k in foreign exchange gains, which shouldn’t be considered part of the business model.
On the other side of that coin is $1.4 million in amortization expense, which you can add back in to the cash flow picture. Therefore, the company really netted about $1.7 million on operations, which is pretty good in my view.
They spent $1.8 million on software development, which is too high in my view. They need to spend less.
At quarter’s end they had $8.4 million in cash and receivables, which is not so good against $8.7 million in payables.
In short, a very satisfactory earnings report, but not a blockbuster once you take the balance sheet into account.
Their $.03 in EPS is really closer to $.06 per share in positive cash flow, which suggest the stock would be very fairly priced around $3 to $5, but not in today’s market.
The chart shows a stock that is doing far better than the major indexes, so we’ll take that as a victory.
For long term investors, this one is a gem. If you’re wondering where it will be in the next few months, impossible to call.
Comments and questions are welcome.
I’d sure feel a lot better about your analysis if you weren’t being paid to market this company.
Editor: I understand your concern. Over the years there has been little correlation between stock price performance and whether we got paid. Our best idea of all time was NTWK- $1.50 to $75 at the high. CPNE at one time as $.15 to $3.80- not too bad. Small companies need to get the word out, and Wall Street won’t pay any attention to them. if they do, they get paid as well. They just disclose it differently. I suggest you look at the numbers, then look at the macro picture. They have doubled in size every year for the past three. Also, a lot of the Chinese stimulus plan is going to cleaning up the environment. It’s what they do, and they will continue growing for the next 10 years. Also, the stock is 66% above the November low, which is remarkable when one considers the indexes are at 20 lows.
Alright, when is enough enough? They just voted another “50,000 options granted to a Consultant of the Company from $3.35 to $1.48.” When is the company going to start thinking about its shareholders? I stuck with this company and have watched the rest of the market take dramatic increases from January on while PN is staying stagnant. Can you get them to discuss what they will be doing to “get the word out” during their next quarterly conference call?
Editor: I am keeping the company on the radar screen because I like the business model, relationships, and room for growth. However, the company does not understand and seems unwiling to make the required commitment to get an audience for its stock. The “old gaurd” at the company is living in never never land, making the assumption corporate performance entites you to a higher stock price. We know where that is getting them. You should also note I don’t own anymore for the time being.
When they’re willing to make the commitment, I’ll make the commitment.
Have you heard if the photo only transactions will be expanded to include video? Is this a direction the company is going and do you think there is an opportunity for retailer buy in?
Editor: That would be a logical direction. The issue here is not services, it is the company’s willingness to get out there and tell their story to the investing world. They are doing nothing, and it is being reflected in the activity in the stock. That needs to change. I expect numbers to come in pretty good on this one, but they won’t trade better by accident until the markets really start to rock again.
Any thoughts on Q2? Did you feel that the team said the right things during their conference call? Are they getting serious?
Editor: I haven’t had time to listen or review the numbers. Will do so.
Huge volumes the last three days, very little movement, why would that be?
Editor: Clearly some vestiges of the past shareholder base headed for the door. The company needs to be far more proactive finding a new shareholder base. Numbers coming in pretty good however.