Interesting Micro-Cap
September 09, 2011
– Comments (2) |
RELATED TICKERS: TIER
Tier Technologies (NASQ: TIER)
This billing technology services company is dirt cheap. Although there are reasons why this company is trading at these depressed values, mainly NOLs for the past few years, which I will admit is no way for a company to survive, I believe current prices provide investors with a comfortable margin of safety.
Tier has $49.6 million in cash and marketable securities, equal to $2.98/share, receivables of $12.46 million, or $0.74/share, and TOTAL liabilities of $25.39 million or $1.52/share. This gives us a pro forma liquidation value of almost $2.25/share completely disregarding all of the other assets.
These fundamentals certainly give me confidence in a floor value for the company. But the real reason I believe this is a company with hidden value is the new management, a new CEO, CFO, and head of marketing. The new CEO has experience in the billing services industry and turned another software company around until it was acquired for a lucrative >50% premium to its share price. The CFO comes from a division of Qualcomm and hopefully brings a new degree of understanding of the business environment and heightened expertise on financial planning and forecasting. They have also diversified their customer base to include more revenues from utilities and education segments, 15% and 13% respectively, which are showing much faster growth than their traditional source of revenues.
In summary, the combination of future business prospects thanks to new management and the downside protection of a fundamentally strong balance sheet provide ample time and resources for a recovery and hopefully a nice return for shareholders.
Let me know what you think, I encourage comments and criticisms!
Disclosure: I have initiated a position in this company and may add more
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