Small cap power: CIMT

[buddjas1]

Eggman

Things are different now.  From the earnings release PR

Mr. Rimon Ben-Shaoul, Chairman of the Board of Directors of Cimatron Said, "after several years of re-organization, cost cutting and extensive product development, we believe the Company is now on the right track for sustained growth and profitability, and that Cimatron's current competitive advantages enable us to reinforce our worldwide market positioning, both in emerging and traditional markets."

http://biz.yahoo.com/prnews/070312/ukm011.html?.v=93

[berloga]

It is interestinng that in Q4 2004 the stock was being barely traded, whereas this time around it has reached the highest volume in one day last week. I believe this is because the company has received a higher visibility to investors. If it was undervalued in 2004 and is still undervalued, this oversight can be corrected by the investors in the (near) future.

[David Randolph]

It is interestinng that in Q4 2004 the stock was being barely traded, whereas this time around it has reached the highest volume in one day last week. I believe this is because the company has received a higher visibility to investors. If it was undervalued in 2004 and is still undervalued, this oversight can be corrected by the investors in the (near) future.

Thanks buddjas1 and berloga

Another difference was the EPS number, which was negative in Q4 2004 ($0.02) and positive in Q4 2006, at $0.07.

[David Randolph]

I want to warn everybody that even though CIMT has, in my view, a lot of potential, it will take tons of patience to wait for the positive news to come out and push the stock higher (even though it can surely move without any news, just on existing information and prospects).

Why do I like this stock so much?

Well, in topics:

- It is just a $21.9 M market cap with $21.5 M revenues in 2006 without any historical dilution;
- It is a software company with gross margin of 84.8% and net profit margin of 9.24% in Q4 2006;
- It achieved 80% revenue growth in China from the year ago levels.

Selling/General/Admin Expenses were 60.6% of sales in Q4, but if the company is able to grow sales as I expect, I believe this % will be reduced and incremental sales will go down to the bottom line, expanding net profit margin further, maybe to the 20% area like other software companies.

The company could show us fat profits immediately, but it continues to spend a lot of money in research and development, investing for the future, as 18.1% of Q4 revenues were spent in R&D.

That is why we're getting news like the following:

• Cimatron's New Automated Drill Reduces Programming Time by up to 80%
PR Newswire (Mon, Feb 26)

• Cimatron's New Version 8 Receives High Praises From Customers and Analysts
PR Newswire (Mon, Mar 5)

• Cimatron Releases Application for Design of Progressive Dies
PR Newswire (Thu, Mar 15)

I'll continue holding CIMT.

[kpunarc]

is it just me or is there a little triangle being formed for another breakout setup...

[buddjas1]

I sure hope so; I was expecting a quicker 2nd wave.  I'll just have to be patient, because that 2nd wave will come.  I missed the 2nd MSI wave because of my lack of patience.

[David Randolph]

I sure hope so; I was expecting a quicker 2nd wave.  I'll just have to be patient, because that 2nd wave will come.  I missed the 2nd MSI wave because of my lack of patience.

1st quarter results will be out probably at May 15, that is, about a month and a half from now. It's interesting to know that CIMT's CFO is former SILC's CFO, Israel is a small country

I was also pleased to see that CIMT, over the recent quarters, bought 100% control or increased its position in several subsidiaries, like in Italy and South Korea.

The market will take its time to digest that big one day move and take the fast money out of the ship before another leg up. One needs patience and courage to sit tight, knowing that jumping from one stock on fire to the other is good when your hand is hot and bad when your hand is cold, in a never ending boom and bust cycle.

I'll keep holding CIMT.

[tokyopua]

The main concern I have with CIMT right now is how thinly traded it is.... if today is any indication this is the most thinly traded stock I think I have ever been in.

[kslifka]

The main concern I have with CIMT right now is how thinly traded it is.... if today is any indication this is the most thinly traded stock I think I have ever been in.

Small market stocks will do that to you.   But all of a sudden one day volume will kick in and the stock will be up 50% before you can jump in.

[David Randolph]

The main concern I have with CIMT right now is how thinly traded it is.... if today is any indication this is the most thinly traded stock I think I have ever been in.

Hi Tokyopua, I don't know if you remember ANGN, I bought it at $4.15, sold at $4.46 for a 7.47% profit and one of the selling reasons was the stock was so thinly traded. This was about a year ago. On Friday ANGN closed at $14 after being a $18 plus stock this January.

After I bought ANGN, the stock was dead for months and suddenly (a few months after my selling decision) it shot up another 100% in a couple of days. Then it died for some more months, almost without any volume ... then another quick shot up.

My conclusion is that some stocks behave this way, probably because the share count is small, they move with sharp impulses and then stay asleep for more or less prolonged periods.

But, the end result is that one year later ANGN is 214% higher than my selling price, and I missed it, even though fundamentals clearly pointed North. I want to learn from the experience and not repeat the mistake of selling because of low volume considerations, because share traded volume has nothing to do with fundamental value and over the long term, fundamental value always prevails.

Another issue is that one can think he can sell the stock, trade other active stocks in the meantime to achieve more return and then jump back when CIMT starts moving. It seems logical, but my experience tells me one doesn't make any money doing this, as he won't make meaningful money making short term trades on liquid stocks (the most probable outcome is to lose money) and will miss the majority (if not all) of the move of the small cap value stock. As he looks back he thinks: "I was right and could have made so much money, but I didn't. Why?"

The answer is: "because you couldn't relax and sit tight. You didn't gave the market the opportunity to properly reward you for being right".

When I say "my experience" it isn't just mine, it is also the experience of hundreds of traders I've followed throughout the years since I started writing about the stock market 8 years ago.

But now you may ask "but how do you know CIMT will behave like ANGN"?

I don't "know", but there are several fundamental signs pointing to that, mainly:

- CIMT is a $21.1 M market cap company without any historical dilution;
- The company had 2006 revenues of $21.5 M, so it is trading at 0.98 times sales. Its industry, the Technical & System Software industry trades at 2.86 times sales;
- The company had EPS of $0.07 over the 4th quarter. I believe, also given the words from the CEO over the earnings press release, that profitability will continue and maybe we'll have EPS of $0.28 in 2007. This means the forward earnings multiple is 9.43. Again, the Technical & System Software industry trades at an earnings multiple of 40. If CIMT does make $0.28 EPS and it does trade at the industry average valuation (I don't see why not), the stock would then be a $11.2 stock by the end of 2007, which would mean a 286% return on my investment.

All I have to do now is to keep monitoring the fundamental developments as I continue holding CIMT.

[tokyopua]

The main concern I have with CIMT right now is how thinly traded it is.... if today is any indication this is the most thinly traded stock I think I have ever been in.

Hi Tokyopua, I don't know if you remember ANGN, I bought it at $4.15, sold at $4.46 for a 7.47% profit and one of the selling reasons was the stock was so thinly traded. This was about a year ago. On Friday ANGN closed at $14 after being a $18 plus stock this January.

After I bought ANGN, the stock was dead for months and suddenly (a few months after my selling decision) it shot up another 100% in a couple of days. Then it died for some more months, almost without any volume ... then another quick shot up.

My conclusion is that some stocks behave this way, probably because the share count is small, they move with sharp impulses and then stay asleep for more or less prolonged periods.

But, the end result is that one year later ANGN is 214% higher than my selling price, and I missed it, even though fundamentals clearly pointed North. I want to learn from the experience and not repeat the mistake of selling because of low volume considerations, because share traded volume has nothing to do with fundamental value and over the long term, fundamental value always prevails.

Another issue is that one can think he can sell the stock, trade other active stocks in the meantime to achieve more return and then jump back when CIMT starts moving. It seems logical, but my experience tells me one doesn't make any money doing this, as he won't make meaningful money making short term trades on liquid stocks (the most probable outcome is to lose money) and will miss the majority (if not all) of the move of the small cap value stock. As he looks back he thinks: "I was right and could have made so much money, but I didn't. Why?"

The answer is: "because you couldn't relax and sit tight. You didn't gave the market the opportunity to properly reward you for being right".

When I say "my experience" it isn't just mine, it is also the experience of hundreds of traders I've followed throughout the years since I started writing about the stock market 8 years ago.

But now you may ask "but how do you know CIMT will behave like ANGN"?

I don't "know", but there are several fundamental signs pointing to that, mainly:

- CIMT is a $21.1 M market cap company without any historical dilution;
- The company had 2006 revenues of $21.5 M, so it is trading at 0.98 times sales. Its industry, the Technical & System Software industry trades at 2.86 times sales;
- The company had EPS of $0.07 over the 4th quarter. I believe, also given the words from the CEO over the earnings press release, that profitability will continue and maybe we'll have EPS of $0.28 in 2007. This means the forward earnings multiple is 9.43. Again, the Technical & System Software industry trades at an earnings multiple of 40. If CIMT does make $0.28 EPS and it does trade at the industry average valuation (I don't see why not), the stock would then be a $11.2 stock by the end of 2007, which would mean a 286% return on my investment.

All I have to do now is to keep monitoring the fundamental developments as I continue holding CIMT.

Thanks for that detailed explanation and perspective.  I can certainly learn to ride out any uncomfort of being in a thinly traded stock with potential like CIMT appears to have.   And I havent heard you speak so highly of a stock since perhaps GOAM so that givers me further confidence.   

I can only add that when it comes to technology, I have always been impressed with Israeli companies.  Warren Buffett has been impressed recently as well (I forget which company he invested in) so we are probably in good company in that regard.

 

[Garoh]

Hi David

I feel like this stock will shoot to the stars soon 

I think we should see nice move today , Hope so 

[David Randolph]

Hi David

I feel like this stock will shoot to the stars soon 

I think we should see nice move today , Hope so 

Still not today Garoh, but we have time.

OK, I've been holding this stock for about 10 days and only now I was able to find what the hell is CAD/CAM:

Computer-Aided Design/Computer-Aided Manufacturing

Isn't this an interesting software company? I'll keep studying and holding it for the long term, technical & fundamental analysis points North.

[ygtrdr]

CIMT moving on news!

http://biz.yahoo.com/prnews/070327/uktu006.html?.v=101

[buddjas1]

Applaud, thanks for the news.