Small cap power: CIMT

[pinoleropuro]

that was quite a stimulating debate guys,
I am a novice just started last year with 10k but had been looking at SHRP so I felt I knew what I was getting into so I got it and made 60%. Boy I got so exited then started to listen to Jim Cramer right when he suggested CNXT at the top. having made "mad money" I jumped in and lost all my mad money trying to dollar cost average as it was going down.
Nullzero, that left me with a pretty strong fear for those types of trade. so now I am trying this longer term approach and with the portfolio having gone down lately its making my stomack a little quizy.
David may the force be with you man, because if you do well so will I.
good trading guys.

[ygtrdr]

Thanks for that jos. Applaud.

[David Randolph]

As I look to my valuation model for CIMT, everything seems reasonable, but of course, there's no absolute certainty that the future will be like I'm expecting.

1) I'm expecting zero dilution going forward. This is because in the 10 years this company has been publicly traded, it didn't increase the share count, as you can check here.

2) Revenue CAGR of 20%. This doesn't look aggressive, but I must say that there wasn't any revenue growth over the years, in fact, 2000 revenue was $25 M and 2006 revenue was $21.5 M. My more optimistic expectation for the future derives from the company increasing its commercial and marketing efforts, as you can read on recent news. It also comes from the chairman of the board words:

«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."»

Also, the company released new software products lately that seem to be doing well:

• 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 to Showcase New Die Design Application at BlechExpo, the Premier International Fair for Sheet Metal Processing
PR Newswire (Mon, Apr 30)

Given all this I expect 20% compound annual revenue growth going forward. It can be more, but it can also be less, revenue may even decline, there's no historical pattern of revenue growth.

3) Final net profit margin of 15%

The net profit margin in Q4 2006 was 9.24%. Since CIMT is a technical software company, I expect its net profit margin to expand as sales rise, but there's no assurance that will happen. It is just my expectation.

4) EPS multiple estimate of 34.12

This is the Technical & System Software industry average earnings multiple. There's no assurance that CIMT will ever trade at the industry average valuation, or that the industry average valuation wont decline.

Given these 4 estimates, my valuation model tells me CIMT will be at $24.27 three years from now, and given that information the optimal selling price today is $15.55 (this is the price at which returns would start being less than 16%, given these estimates).

My current strategy tells me to continue holding CIMT through all the ups and downs and sell only at the optimal selling price given by my valuation model.

Now, I'm free to:
- Change estimates when incoming information points to a different reality or future;
- Change the strategy whenever I feel it is appropriate or better for long term returns of the Main Portfolio.

I thought I didn't have to make these warnings, but from posts on another thread (SILC) it looks like people don't understand the risks of forecasting or the difficulty of getting all the needed information in a short period of time (if I knew everything at once, why would I be doing daily updates on my holdings? And if I tried to know all at once, you would have to wait months for a new pick and there wouldn't be any analysis from then on. Moreover, company's fundamentals change, it's a dynamic, not static, environment).

I'll keep holding CIMT.

[stocky]

Following is a link for various CAM/CNC products/Cos. [Just googled for CAD/CAM]

http://www.tenlinks.com/cam/products.htm

In some earlier post CIMT was compared to Autodesk [ADSK] but I think they are in completely different market and products. I am a user of Autodesk and Bentley products at work and knows the superior edge that Autodesk has. For present other software companies do not pose any challenge to Autodesk CAD software. I dont know how big the CAM and CNC software segment is but any company grabbing market share like Autodesk should do very well once it has a wide user base like Autodesk has.

I dont have a position in CIMT.

[David Randolph]

I dont have a position in CIMT.

But you should have stocky, you should. Any fundamental reason for not owning CIMT? Thanks

On a short term note, today's early morning volume suggests a strong rally may unfold, but it doesn't really matter for the long term outcome of this investment.

Of course, one can't compare ADSK and CIMT, ADSK is a $9.7 B market cap, CIMT is a tiny $27 M market cap. But they're in the same Technical & System software industry.

[Se7en]

On a short term note, today's early morning volume suggests a strong rally may unfold, but it doesn't really matter for the long term outcome of this investment.

looks like you might be right, there were 25.000 shares on the bid at $3.50! 

[David Randolph]

On a short term note, today's early morning volume suggests a strong rally may unfold, but it doesn't really matter for the long term outcome of this investment.

looks like you might be right, there were 25.000 shares on the bid at $3.50! 

Up 6.5%. Sometimes one has to jump start things

Anyway, like I said, it doesn't mean anything for the long term outcome of this trade, but the stock was just too cheap, and if stocky, which usually is a strong hand, sold his shares, I was afraid that many people here were letting go of CIMT, which I believe is such an extraordinary investment.

It took just a little bit of wind on its sails ... good luck

[buddjas1]

It took just a little bit of wind on its sails ... good luck

Yep, I bought into the rally (my NVTL $).  Let's hope it continues.

[David Randolph]

It took just a little bit of wind on its sails ... good luck

Yep, I bought into the rally (my NVTL $).  Let's hope it continues.

Good move buddjas1 (but NVTL was good too, but of course, not the same possibility of a big gain over a "not so long" period of time).

I hope stocky got himself some shares too, he deserves them. Anyway, more opportunities will appear, in this or other stocks.

[raspi]

nice prediction David  . I think that a run up before earnings is likely and I really hope that Q1 report will confirm that they turned into profitable company!

[mbaugh]

I dont have a position in CIMT.

But you should have stocky, you should. Any fundamental reason for not owning CIMT? Thanks

On a short term note, today's early morning volume suggests a strong rally may unfold, but it doesn't really matter for the long term outcome of this investment.

Of course, one can't compare ADSK and CIMT, ADSK is a $9.7 B market cap, CIMT is a tiny $27 M market cap. But they're in the same Technical & System software industry.

David,
WOW! Talk about timing! How did you predict the move?  What signal gave you the impression a rally was about to take place?

BTW- You are doing a great job!  

[David Randolph]

David,
WOW! Talk about timing! How did you predict the move?  What signal gave you the impression a rally was about to take place?

BTW- You are doing a great job!

Thanks mbaugh, the stock was trading at a critical technical point this morning as you can see on the chart below and volume was above average for that time of the day, so I put some shares on the bid and actually bought a few and the stock moved to the upside (buddjas1 helped too). But don't think I can predict short term moves because of this, I can't.

It would be nice if CIMT could close above $3.86 with volume of more than 140 K shares, that would probably set the stock on fire. Anyway, longer term only fundamentals matter, and I believe they are, or they're about to be, very attractive.

Got to go now, good luck

[nullzero]

CIMT starting to move big time

[jorgegr]

A higher traded volume made the marvellous jump.
The following chart shows that David is right about the need of 140000
shares to continue the rally. March 12th volume changed the trend
Hope this volume continues it's strength enabling good profits to holders.

Best luck to all and applauds to David's pick.

  PRICES

Date        Open High   Low   Close Volume Adj Close*
4-May-07 3.50   3.50  3.33   3.45   35,500   3.45
3-May-07 3.60   3.60  3.43   3.50   26,600   3.50
2-May-07 3.54   3.56  3.45   3.50   29,900   3.50
1-May-07 3.78   3.86  3.57   3.58   56,700   3.58
30-Apr-07 3.30  3.79  3.26   3.79  139,500  3.79
27-Apr-07 3.50  3.52  3.25   3.35   84,100   3.35
26-Apr-07 3.52  3.70  3.50   3.52   48,300   3.52
25-Apr-07 3.65  3.66 3.50    3.64   27,800   3.64
24-Apr-07 3.59  3.76 3.50    3.61   51,400   3.61
23-Apr-07 3.76  3.91 3.52    3.59   57,400   3.59
20-Apr-07 3.68  3.76 3.62    3.69   59,200   3.69                 
19-Apr-07 3.78  3.98 3.66    3.66   57,500   3.66
18-Apr-07 3.61  4.10 3.55    3.82  133,000  3.82
17-Apr-07 4.20  4.20 3.56    3.80  208,400  3.80
16-Apr-07 4.60  4.73 4.08    4.14  175,000  4.14
13-Apr-07 4.52  4.58 4.43    4.58    38,100  4.58
12-Apr-07 4.30  4.58 4.28    4.41    67,500  4.41
11-Apr-07 4.30  4.48 4.20    4.34    57,500  4.34
10-Apr-07 4.60  4.60 4.21    4.30  118,200  4.30
9-Apr-07 4.01    4.59 3.96    4.46  239,900  4.46
5-Apr-07 4.15    4.18 3.85    4.04    98,400  4.04
4-Apr-07 4.06    4.20 3.78    4.07  262,600  4.07
3-Apr-07 3.31    4.11 3.22    4.09  687,900  4.09
2-Apr-07 3.21    3.30 3.06    3.22    44,100  3.22
30-Mar-07 3.10  3.22 3.00    3.10   31,900  3.10
29-Mar-07 3.25  3.33 3.06    3.09   63,900  3.09
28-Mar-07 3.26  3.40 3.05    3.19 183,600  3.19
27-Mar-07 2.57  3.54 2.56    3.30 715,500  3.30
26-Mar-07 2.68  2.69 2.60    2.62   31,700  2.62
23-Mar-07 2.63  2.67 2.60    2.64   32,500 2.64
22-Mar-07 2.79  2.85 2.66    2.68   58,500 2.68
21-Mar-07 2.72  2.85 2.61    2.75   78,200 2.75
20-Mar-07 2.50  2.94 2.50   2.75  151,300 2.75
19-Mar-07 2.52  2.52 2.38   2.50  103,100 2.50
16-Mar-07 2.90  2.90 2.43   2.53  207,600 2.53
15-Mar-07 2.80  2.95 2.80   2.90    85,800 2.90
14-Mar-07 2.95  3.05 2.80   2.89  128,800 2.89
13-Mar-07 2.90  3.05 2.72   2.91  381,500 2.91
12-Mar-07 2.10  3.44 1.88 3.04 1,416,600 3.04
9-Mar-07 1.40    1.42 1.40   1.40      1,400 1.40
8-Mar-07 1.37    1.37 1.36   1.36      1,400 1.36
7-Mar-07 1.39    1.39 1.37   1.38      2,500 1.38
6-Mar-07 1.38    1.39 1.38   1.39      4,800 1.39
5-Mar-07 1.39    1.39 1.39   1.39             0 1.39
2-Mar-07 1.40    1.40 1.39    1.39        900 1.39
1-Mar-07 1.38    1.40 1.38    1.40   18,200 1.40
28-Feb-07 1.40  1.40 1.40    1.40        200 1.40
27-Feb-07 1.40  1.40 1.40    1.40     3,100 1.40
26-Feb-07 1.42  1.43 1.42    1.43     1,000 1.43
23-Feb-07 1.43  1.43 1.43    1.43            0 1.43
22-Feb-07 1.43  1.43 1.43    1.43            0 1.43
21-Feb-07 1.43  1.43 1.43    1.43            0 1.43
20-Feb-07 1.40  1.43 1.39    1.43     1,000 1.43
16-Feb-07 1.40  1.40 1.40    1.40     1,000 1.40
15-Feb-07 1.40  1.40 1.40    1.40            0 1.40
14-Feb-07 1.42  1.42 1.37    1.40     2,400 1.40
13-Feb-07 1.42  1.47 1.37    1.41     8,300 1.41
12-Feb-07 1.36  1.36 1.36    1.36            0 1.36
9-Feb-07 1.36    1.36 1.36    1.36        100 1.36
8-Feb-07 1.40    1.40 1.40    1.40            0 1.40
7-Feb-07 1.38    1.40 1.38    1.40     2,800 1.40
6-Feb-07 1.43    1.43 1.43    1.43            0 1.43
5-Feb-07 1.43    1.43 1.43    1.43     1,000 1.43
2-Feb-07 1.38    1.40 1.35    1.40     8,800 1.40
1-Feb-07 1.41    1.41 1.38    1.38        200 1.38
31-Jan-07 1.38   1.38 1.38    1.38            0 1.38

[buddjas1]

It would be nice if CIMT could close above $3.86 with volume of more than 140 K shares, that would probably set the stock on fire. Anyway, longer term only fundamentals matter, and I believe they are, or they're about to be, very attractive.

Well, we have the volume; let's see if we cannot finish strong and close above 3.86.