RE:Negative Information?I have been watching the stock for several months. I think the price has gotten waaaay ahead of the earnings potential over the past few weeks. Too much fear of missing out detached from reality. That is just my opinion though. NAMSYS is a good little company but it looks like a bunch of hedge funds are pumping it up. Will a dump come soon? I do not know. The biggest risk right now from my perspective is excessive valuation. But here are a few others:
1. NAMSYS is a tiny, illiquid stock (ie easily manipulated by hedge funds). You might not be able to buy a more meaningful position or exit if something bad might happen. In a bad situation, we might end up being stuck with a bunch of worthless paper that some bigger shareholder might then take out private at a rip-off price. They will be able to do whatever they want and no one will object or sue them or notice since everyone else will be a bunch of broke retail investors who cannot do anything and whose few thousand shares do not justify paying for an expensive lawyer. I had this happen before by questionable management at one small pharma company and a smaller energy company, which were both taken private against the will of most little shareholders after a bunch of management/dominant shareholder shenanigans and convenient margin calls on secondary exchanges. I do not know enough about NAMSYS shareholder structure and trustworthiness of the management but I certainly do not want to be bullied out of my money again. It is one of the worst feelings because of the powerlessness to do anything about the injustice. There is also a large information assymetry in a small company like this, with insiders and connected hedge funds owning large stakes. This might further exacerbate the one-sided rip-off since we will not know why the stock price is going up or down, while they might be orchestrating their little schemes to buy new Lamborghinis with our money.
2. NAMSYS is reliant on a handful of large, concentrated customers in a very small, niche market. If someone like BRINKS were to walk, NAMSYS would have a really hard time - especially now that they have substantially increased their workforce (which has also not appeared on the books yet, but will probably reduce profitability in coming quarters, unless they won some unannounced contracts). Relyign on a handful of large customers might easily lead to lumpy financials and material drops in profitability/cash flow and roller-coaster performance. Management has already shown that they might have a really hard time keeping pricing power with their handful of key customers ---> it appears that NAMSYS has not been able to increase prices over many quarters despite of inflation, rising headcount, and rising operating expenses and instead resorted to trying to pump a lower-margin white-lable market to try to boost revenue... are they trying to hide something, because in the long run I am not sure how this will help maintain margins... they might sugar coat it, but you do not erode your margins if you are not forced to). With a consolidating, declining cash-handling market, there are also a few new clients they might be able to win or replace if they were to lose one of their key existing customers. In other words, if they were to lose someone like BRINKS, they will likely be screwed since there is essentially no one else of comparable size whom they could woo. Moreover, if the big boys walk, then the rest of the market has an extra incentive to drop NAMSYS and go with whatever the big boys are using, if they want to do business with the big boys or be eventually acquired by the big boys. NAMSYS is not some SAAS company disrupting advertising or enterprise information management in the blue oceans of tens of millions of businesses or billions of individuals... it is a legacy company in a dying industry with a small number of penny-pinching customers. This is why I am so concerned about the valuation, since I don't see how NAMSYS could ever grow up to be a large company - it's only longer-term future is either being a dividend cash cow or being taken out, but neither will be interesting if the purchase price is too high.
3. There is also a large regulatory risk. In my understanding, NAMSYS has grown in step with the weed legalization in US states and the fact that federally-regulated financial institutions cannot process or handle payments from weed (ie no major banks, no credit card companies, no established online retailers etc can touch the business right now or federal gov will shut them down). This has artificially spurred up cash use and allowed a bunch of mom-and-pop operators to eek out a living, serving small state credit unions/cooperatives. If there will be a federal regulatory change, all of these might go out of business since demand for cash and thus cash-handling services will probably substantially drop... and we are back to a few large players in a declining, dying market, who are trying to cut every expense they can - especially if it is recurring every month. With a single stroke of open, a large part of NAMSYS's growing addressable market can (and probably in the not too distant future will) disappear.
4. NAMSYS is still essentially a one-trick pony competing in a world of vertically integrated players who can give the pony away to book other revenue. I am not sure if NAMSYS will be able to compete in the long term with with established, vertically integrated European rivals and leading OEM safe manufacturers which are agressively expanding in US and the rest of the world. This means NAMSYS still has some room to grow but it appears to be severely limited by fierce competitors, who do not need to act rationally in pricing their software since they earn most money from other sources (and have access to much cheaper capital in EU). If these vertically integrated competitors decide to give the software out as freebie, they will increase their revenue derived from their primary product and still be happy, while NAMSYS might go out of business. NAMSYS will also probably never be able to meaningfully penetrate or grow in the European market or other markets which are dominated by its vertically integrated competitors.
5. In my understanding, NAMSYS's software is useful primarily for integrators with multiple, obsolete systems and legacy equipment... newer operators (ie new emerging markets) are less likely to be impressed or won by a recurring subscription model since they can get a package deal from the OEM suppliers probably for a lower total cost and far less headache. Financial institutions and other potential clients might be also reluctant to incurr an impairment charge on their multi-year software investments in order to purchase a new SAAS software from a little company like NAMSYS. In times when financial institutions are cutting down on workforce, no managers want to appear making many years of silly decisions and be fired for it. Similarly, in these uncertain times, why would a large financial institution take an unnecessary continuity risk by partnering with a tiny company like NAMSYS, which might not exist in a few years, especially since NAMSYS's competitors are far better established players who literally print money and have other quasi-monopoly sweetheart deals with foreign governments and also sell not just the software but also the actual hardware and all of the necessary infrastructure.
As I have written above, I still really like NAMSYS. It ranks really high on most of my screens. Many of the above issues also make it an interesting acquisition target by one of its large customers. I am just concerned for paying such a high price for a company with many more risks than other companies which operate in markets with much better outlook. It is hard to make money in a mature, dying market (look for example at Computer Modelling Group which is also a really nice Canadian niche software company about which the market was initially super optimistic but after six years it is still trading at half of its previous price... and it is stuck as dead paper... a zombie with no prospects because it is in a dying market with no growth and no pricing power and yet despite of having its price destroyed over the years, its poor earnings mean that it is still too expensive to be taken out and management is not interested or able to find a new vertical to reinvigorate the company). Maybe NAMSYS management are geniuses who have the secret sauce to pull off long-term growth in new verticals and not become another zombie. I am not sure. In the meantime, we can buy for a little bit higher multiples proven market consolidators who roll-up dozens of niche software companies for 50% cheaper than what NAMSYS is trading at right now... that is where most of my money went over the recent past. But I still keep an eye on NAMSYS [which is why I also read this board].
What are other people thinking? Please, correct me if my understanding or opinions are wrong. Also, please, do your own due diligence and don't trust some random poster on an online forum.