GSB

[BigSully1]

Small caps have been outperforming recently, but not tech.

Anyway, it's a sign of health for this market that small caps are outperforming again, because they're more attractive from a fundamental standpoint and it improves the breath of the market, in technical terms.

Yes, I also like that the transports are leading the charge as they almost always do at the start of a new bull rally. TBSI was great trade for me.  HRZ just broke out of a very nice base, though I don't have any (yet).

[David Randolph]

TBSI was great trade for me.  HRZ just broke out of a very nice base, though I don't have any (yet).

Yep, awesome trade in TBSI, congrats

HRZ is a curious shipping company ... and it goes to show the importance of EPS in valuation. HRZ sells a lot but profits little, which is in sharp contrast with other shipping companies. I wonder why is that?

I'll take a look at HRZ in the Watch List section, thanks for the suggestion, the chart looks great.

[David Randolph]

GSB has been suffering from a multiple contraction like most stocks (also the 3rd quarter numbers were below expectations - but still showed strong growth), but I believe the price is cheap enough now.

Insiders agree with me, since they just bought 100,000 stock options at $4.1.

I'll continue holding GSB for the long term. 

[David Randolph]

I feel bad for having been so complacent with GSB when it was trading above $7, as I "knew" the company would disappoint investors over the 3rd quarter, because analysts expectations were too high, and yet I just kept holding for the long term.

Now, instead of almost a 100% gain on this stock I look to the Main and ... it shows a 2% loss

The lesson learned is: Don't be complacent and take profits when there's a strong fundamental reason to do it. There's always the possibility of buying back the stock later, at a lower or even higher price.

Anyway, now I see GSB as surely undervalued. The 2008 EPS estimate of $0.26 is the worst case scenario and the stock trades at 14.4 times that estimate.

If GSB gets a new contract with a Government entity (like it did in Q2 2007), or if it has some business coming from the Synteras partnership, or if the Wide Area File Sharing and Continuous Data Protection softwares sell better than expected ... GSB will blowout those estimates and the share price will surely reflect that.

The 4th quarter 2007, given the sharp slowdown in the US GDP growth, is encouraging:

• GlobalSCAPE Projects 2007 Revenues to Exceed Guidance by almost $1M
Business Wire (Tue, Jan 15)

$4.4 M revenue is 12.8% more than in the prior quarter and means 62% growth annualized. I see that analysts are expecting $0.04 EPS for this quarter, but given the guidance the company already provided I'm sure it will be $0.05 instead. Probably this positive "surprise" will provide a boost to the share price, just like the 3rd quarter negative "surprise" made it fall 50% from the highs

I'll continue holding GSB for the long term.

[la-onda]

nice GSB interview about Wide-Area Management

Distributed data is having a big impact on the enterprise. How to manage the secure transfer of data around the world is the subject of this IT Link podcast, with Ellen Ohlenbusch, vice president of marketing and strategic alliances with GlobalSCAPE.

http://www.eweek.com/c/a/Infrastructure/WideArea-Management/

[terainvestment]

Hi la-onda,

I cannot read Deutsh...so what is the content in english of your link?
http://www.keinbockaufnazis.de

Is it anything in favour or against NAZIS?

[la-onda]

AGAINST of course !!!!!!!!!

[David Randolph]

nice GSB interview about Wide-Area Management

Distributed data is having a big impact on the enterprise. How to manage the secure transfer of data around the world is the subject of this IT Link podcast, with Ellen Ohlenbusch, vice president of marketing and strategic alliances with GlobalSCAPE.

http://www.eweek.com/c/a/Infrastructure/WideArea-Management/

Indeed La-onda, it explains part of GSB's story.

There was a press release just out from GSB:

• GlobalSCAPE Introduces FIPS 140-2 Version of Secure FTP Server
Business Wire (Tue 8:00am)

«FIPS 140-2 validation is required by most Government departments, including the Department of Defense, to protect the integrity of files that cross their networks. Similarly, companies in the healthcare, financial and manufacturing markets are under pressure to ensure that customer and patient information is secure in transit and at rest. With this third-party verified validation, customers can deploy GlobalSCAPE's FIPS 140-2 version of Secure FTP Server, knowing the software has met the highest security standards.»

«Pricing and Availability

GlobalSCAPE's FIPS 140-2 version of Secure FTP Server is available immediately for $895. For more information or a free 30-day trial, contact sales at 1-800-290-5054 or visit our website http://www.globalscape.com.»

I hope this good news helps GSB moving up from this $3.6 level ... it is painful to look at the chart below.

The long term fundamental story remains intact, but unrealistic expectations for one quarter and the inevitable failure to deliver on those expectations took the stock down 53% from the highs.

Anyway, a couple of years from now I see GSB at $16 or more and I'll keep holding it for the long term. 

[David Randolph]

Well, we rose 1.94% on yesterday's session, not bad, considering the last three months or so

GSB is expected to grow EPS by 40% in the next 5 years and it trades at 14 times 2008 EPS estimates. If the company indeed delivers on the 40% EPS growth, and consider it will earn 5 cents in the 4th quarter for an annual profit of $0.24, this means EPS will be $1.29 in 2012.

Apply the same EPS multiple that we have now and get an $18 stock.

This 40% CAGR is less than I expected when I initially bought GSB, but still very attractive in my view. And in 2007 EPS will grow 85% (from the 2006 level), so there's still a chance that GSB will do better than 40% growth over the long term. 

I'll keep holding GSB for the long term.

[pinoleropuro]

here is Zacks' GSB screen print.

[tokyopua]

I got back in GSB today, the market rally was my cue and the chart looks ready to turn around.

[David Randolph]

I got back in GSB today, the market rally was my cue and the chart looks ready to turn around.

Hi Tokyo, GSB was left out of yesterday's rally, which disappointed some people and so they sold.

This type of behavior often happens in small and illiquid stocks ... traders think "relative weakness" when what's really happening is "illiquidity and lack of attention". But the volume increasing is a good sign, it means that value investors are being attracted by the lower price.

I think that in a couple of weeks time GSB will be back above $3.85. Over the long term I expect a lot more and I'll keep holding.

[David Randolph]

Hi Tokyo, GSB was left out of yesterday's rally, which disappointed some people and so they sold.

This type of behavior often happens in small and illiquid stocks ... traders think "relative weakness" when what's really happening is "illiquidity and lack of attention". But the volume increasing is a good sign, it means that value investors are being attracted by the lower price.

I think that in a couple of weeks time GSB will be back above $3.85. Over the long term I expect a lot more and I'll keep holding.

One week has passed and GSB closed at $3.75, so just 10 cents to go back above the $3.85 support level. 4th quarter results will be out in mid-March and given the company's guidance I expect EPS of 5 cents per share for the quarter and 23 cents for the full year of 2007.

[tokyopua]

Hi Tokyo, GSB was left out of yesterday's rally, which disappointed some people and so they sold.

This type of behavior often happens in small and illiquid stocks ... traders think "relative weakness" when what's really happening is "illiquidity and lack of attention". But the volume increasing is a good sign, it means that value investors are being attracted by the lower price.

I think that in a couple of weeks time GSB will be back above $3.85. Over the long term I expect a lot more and I'll keep holding.

One week has passed and GSB closed at $3.75, so just 10 cents to go back above the $3.85 support level. 4th quarter results will be out in mid-March and given the company's guidance I expect EPS of 5 cents per share for the quarter and 23 cents for the full year of 2007.

Nice day for GSB, looks to maybe be perking up.  What do you think the earnings you mention above will do for the stock price?

[David Randolph]

Nice day for GSB, looks to maybe be perking up.  What do you think the earnings you mention above will do for the stock price?

Well, if we get the 5 cents EPS I expect, that will be 25% above expectations. It will also put the full year number at $0.24 EPS, above the $0.21 expected by analysts (which by the way is inconsistent with their 4th quarter estimate, since GSB already made $0.19 EPS in the first 9 months of the year).

With $0.24 EPS, GSB's trailing earnings multiple will be 15.6, which is attractive, since EPS growth from the year ago period will be 85%.

However, since the general market is so gloomy now, probably it will be tough to excite investors to push GSB to, say, 20 times earnings, or $4.8 a share. But with GSB there's always the possibility of a big and positive announcement ...

Let me just say that I believe the downside is limited and I remain confident in GSB as a sound long term investment.

By the way, let me just check GSB's big brother, RVBD:



Almost back down to its IPO price, what a misery

Still it trades at $18.26/$0.20 = 91 times 2007 EPS, or almost 6 times more than GSB. The differences in valuation from mid caps to small caps are huge.

Anyway, there's very strong growth expected for RVBD and maybe the stock is starting to get attractive. But GSB can grow as fast as RVBD so it a lot more attractive in my view.

I'll keep holding GSB for the long term.