RE: RE: Number of O/S sharesI would agree. They have the financial results right now for significant upside in the share price. .006eps last qtr with sequential improvements in revs and eps since 2008 should lead to a share price in the .20's. It hasn't because the stock is under the radar but a good Q4 and Q1 should lead to a good revaluation towards fair value.
Sooner or later investors will realize what a nice combination this company represents. You get tremendous financial performance during a recession. Pace of rev growth has not slowed down during the downturn. In fact, prepaids make a lot of sense during tough economic times. They provide automatic budgeting for folks who can't control their spending habits or who want to budget their expenditures for certain financial items. SCG.v has shown tremendous growth in good times and bad. They are the perfect way to play either a decent rebound from the recession or the dreaded double dip recession.
The geographic expansion into the US could provide huge growth, no matter what happens to the economy. I'm a little concerned about how they are going to finance it and the higher levels of competition, which could drive down margins. Additionally, they will have to cope with the dreaded currency exchange rates, which could throw some big currency adjustments into the qtrly financials and either boost or wipe out qtrly profits.
Remember SCG sells high dollar value products but only retains a small percentage for themselves. Gross margins are in the 7% range. If you sell 20 million dollars in phone cards in the US and the US$/C$ exchange rate moves 5%, you have a great qtr or a huge loss. If/when they expand, they will have to use hedges to minimize the currency fluctuations. Big moves in profitability are bad for p/e ratios. Investors don't like surprises and that what currency fluctuations bring. So they tend to give companies with big FX exposure, lower p/e's to adjust for the risk of disappointment. We don't need any lower p/e's!!!!!
Still I can't help feeling extremely optimistic about SCG.v. I finished my buying last week(I've said that several times but keep buying more) I chased it a bit at .07 for 389,000 shares but did the calculation on fwd p/e again and figured it's still dirt cheap.
.006eps X 4 = .024 fwd eps. So I paid less than 3X fwd p/e ratio for one of the few stocks you can find in the US and Canada that is prospering in the current economic environment. Share count is a little high but manageable. Sector is huge with lots of upside growth. Margins are improving, and look very favorable with the newer products.
We are still several weeks away from Q4 audited financials. Q1 will come fairly soon after that. Two solid qtrs and I think SCG is on the way to much higher levels(.20 to .30)! There's speculation in there but the track record is good. The news has been consistently good and mgmt seems to have a good plan to move the company into higher margin products. They told us about the higher margin products and now the news releases are telling us that the plan is being executed.
Bobwins