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Aug
6
Two million more reasons for investors to like RDM Corporation
Posted by: Gerry Wimmer
8/6/2012
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TOP IDEAS: Investors take notice of cash cow business. RDM Corporation (TSX: RC) stock up 48%.

"Cha-ching,” "cha-ching” is what RDM shareholders are hearing this year.

As of June 30th, RDM reported cash has grown by another $2 million in fiscal 2012. The Company now has $16.9 million in its bank account against no debt.

My bet is that RDM has accumulated more cash since its last report. Why?

RDM is a provider of payment processing services, a cash cow business, and this cash cow is growing.

RDM has pioneered a payment processing system to capture cheque images for electronic transmission and deposit to financial institutions (Remote Deposit Capture "RDC”), thus eliminating the physical handling of paper cheques.

US banks are increasingly deploying RDC technology and, in particular, RDM's Image and Transaction Management Systems ("ITMS®”) to enable the elimination of many costly cheque processing steps and to facilitate the development of improvements to the bank's back-office operations, improve treasury operations, while at the same time open the door for new and improved service offerings to bank customers.

At each ITMS® site RDM earns reoccurring revenues for cheque images processed for payment. 27,506 ITMS® sites have been deployed, up 32% in the past year the Company has reported.

The growth in ITMS® site deployments is reflected in the Company's profitability.

In fiscal Q3, RDM reported its payment processing revenues grew by 15%. Better yet, the Company earned 65% gross margins on its recurring revenue base, which were 58% of total sales in Q3. Hardware sales of RDM's digital imaging products make up the balance.

The Company reports that the US marketplace continues to show strong demand for its services.

We are not surprised but rather expected RDM's recent growth spurt and profitability (See: Growth returning to cash-rich RDM Corporation).

Nevertheless we are still amazed by the profit potential of this cash cow business.

Cha-ching!

RDM's share price has traded up 48% since its posting date on Investorfile's Top Ideas for small cap value stocks.

Author's Ownership Position TSX: RC - Long


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com is not engaged in an investor relations agreement with RDM Corporation nor has it received any compensation from RDM Corporation for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of RDM Corporation through open market transactions and for investment purposes only.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.