SuperCom Ltd. (SPCB) is a global provider of conventional and digital identity solutions, delivering superior safety, identification, and security solutions worldwide to governments and commercial and public organizations. In addition, the Tel Aviv-Yafo, Israel-based company provides a one-of-a-kind all-in-one field-proven RFID & mobile technology and product suite and innovative supplemental services for various sectors.
The stock is up 11.7% in price year-to-date to close yesterday's trading session at $0.58 due to insider buying. The company's Chairman, Aerie Trabelsi, acquired 512,000 shares of SPCB stock on the open market. Trabelsi stated, "I believe the SPCB current stock price levels do not reflect the high intrinsic value of the company. This recent 512,000 SPCB shares purchase, and my purchase program, provides me the ability to opportunistically acquire SuperCom shares and underscores my ongoing belief in the company."
The stock has a history of weak price performance, however. The shares have declined 7.6% in price over the past three years and 6.4% over the past five years. In addition, its net income and EPS have declined at CAGRs of 15.9% and 14.3%, respectively, over the past three years.
Here is what could shape SPCB 's performance in the near term:
Positive Development
This month, SPCB was awarded the first full-scale electronic monitoring contract in Croatia by the Ministry of Justice and Administration and will use SPCB's PureSecurity Electronic Monitoring (EM) Suite. SPCB seeks to assist Croatia in increasing public safety efficacy, reducing jail congestion, and minimizing recidivism through its innovative and proven technologies and services.
Private Placement
Last month, SPCB entered a securities purchase agreement with a single institutional investor to acquire approximately $4.7 million of its common stock in a registered direct offering with warrants to purchase common stock in a concurrent private placement. The combined effective purchase price for one common share and a warrant to acquire 0.75 common shares is $0.6174. SPCB has agreed to sell 7,531,585 ordinary shares under the provisions of the securities purchase agreement.
Mixed Financials
SPCB's revenue has grown 25% year-over-year to $3.11 million for the three months ended Sept. 30, 2021. Its cash and cash equivalents increased 67.2% from the year-ago value to $5.25 million. However, its operating loss came in at $1.79 million. Also, the company reported a $2.44 million net loss, while its loss per share amounted to $0.14 over this period.
Poor Profitability
SPCB's 44.6% trailing-12-months gross profit margin is 10.1% lower than its 49.5% industry average. Also, SPCB's ROA, net income margin and ROC are negative 18.1%, 72.1%, and 8.3%, respectively. And its trailing-12-month cash from operations stood at negative $9.11 million versus the 93.83 million industry average.
POWR Ratings Reflect Uncertainty
SPCB has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. SPCB has a D grade for Quality. Its mixed financials are consistent with the Quality grade.
Of the 44 stocks in the B-rated Outsourcing – Business Services industry, SPCB is ranked #41.
Beyond what I have stated above, one can view SPCB ratings for Stability, Growth, Momentum, Value, and Sentiment here.
Bottom Line
While SPCB's increasing investments across business segments and growing government projects exhibit long-term solid growth prospects, the company's lack of profitability could concern investors. In addition, analysts expect its EPS to remain negative in its fiscal year 2022. So, we believe investors should wait before scooping up SPCB’s shares.
How Does SuperCom Ltd. (SPCB) Stack Up Against its Peers?
While SPCB has an overall C rating, one might want to consider its industry peers, ARC Document Solutions Inc. (ARC), Civeo Corporation (CVEO), and Genpact Limited (G), which have an overall A (Strong Buy) rating.
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SPCB shares rose $0.03 (+4.52%) in premarket trading Thursday. Year-to-date, SPCB has gained 9.91%, versus a -3.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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