Analysts are jumping on the shares of this company. They were just recommended by FBR Capital, with a $28 price target. They were also upgraded to “overweight” at Stephens and initiated as “overweight” at First Analysis.
CalAmp (CAMP)
from The 100% Letter
CalAmp (CAMP) has been on my radar since 2013 but which I’ve held off on since shares appeared overvalued. Not so anymore.
CAMP hit a 52-week high of nearly $35 in March 2014. Then the small cap correction hit at around the same time CAMP delivered a slightly disappointing earnings report. A couple of months and a 55% correction later, CAMP’s stock is cheap. Better still, it appears ready to recover much of its recent losses.
CAMP is a leader in machine-to-machine communications (M2M). It builds the hardware (wireless routers, gateways, tracking devices, monitors, etc) and software (GPS mapping, app store, asset utilization, etc.) that allows electronic devices to communicate with each other, and with an enterprise software system, all around the globe. M2M communications is a rapidly growing market and CAMP is one of the best in the business.
Its products have become extremely popular for tracking the location and usage of high-value assets, including mobile assets like shipping containers, rental car fleets, government vehicle fleets and heavy equipment, as well as fixed assets such as power generators, electricity grids and oil rigs.
The relative cost of installing CAMP’s equipment is small whereas the value it provides is large. This is why companies like Caterpillar have begun to use CAMP’s equipment for both fixed and remote assets around the globe.
Catalyst #1: Strong demand for mobile resource management MRM products
Catalyst #2: Large Untapped Markets Still Exist
Catalyst #3: Recurring Revenues Growing as Result of Software Solution
Catalyst #4: Satellite Business Generating Significant Cash
Catalyst #5: Company-Wide Margins expanding
With Satellite doing better, M2M business ramping and reoccurring software sales rising, CAMP’s overall profits have grown considerably. Operating margins bottomed out at around 20% in 2010 and have increased to 34% today.
Put all the pieces together and it’s reasonable to expect CAMP to grow profits by 20% to 30% per year for the next few years, potentially more once we see how big the CAT deal is and how well car insurance business picks up. And shares appear cheap, trading at around 19-times current year estimated adjusted earnings and 16-times next year’s adjusted earnings.
We’re looking at a company here with zero debt and over $28 million sitting in the bank too. With a market cap of just $686 million, I think CAMP has a ton of upside potential. A move back to its 52-week high would represent an 80% gain.
Tyler Laundon, The 100% Letter, 100percentletter.wyattresearch.com, 866-447-8625, May 29, 2014