TOP IDEAS: Recent trends, stock buy-back and big contract awards are amongst the catalysts for DDS Wireless International (TSX: DD) stock in 2013.

Given the most recent financial results, we feel very positively about our prediction #5 that we made at the end of last year: "DDS Wireless International - Our Top Ideas stock which is positioned to have a rebound year in 2013," (See: Investorfile has a view for 2013).

Here is why.

For most of 2012, DDS Wireless (TSX: DD -$2.02) faced many unexpected headwinds; slower markets in Europe, unfavourable exchange rates (both the Euro and US dollar versus the Canadian dollar), a customer base in transition, revised product offerings and the infancy of marketing programs for new vertical markets within the USA.

But in Q4, the headwinds subsided and results were outstanding.

DDS Wireless reported its highest level of quarterly EBITDA in the Company's history, $3.2 million (27% of revenues) and $0.16 per share in earnings in Q4 of 2012. Whereas the first three quarters in 2012 turned out to be a period of transition and repositioning, said the Company, Q4 saw it return to key historical performance trends like 50% gross margins with revenues of $11.9 million for the quarter.

DDS Wireless provides application software and hardware for transit routing, scheduling, real-time dispatching, vehicle location and tracking software, and communication infrastructure as well as in-vehicle wireless devices. The Company supports its transportation industry customers worldwide, which consist mostly of Transit and Taxi fleet operators. Recently DDS Wireless has experienced strong growth for sales in new market verticals such as Limousines, Airport Shuttles and Work Fleets.

The Company labelled 2012 as a "difficult” year even though it still generated substantial profits. But for 2013, DDS Wireless announced that the Company is on a short list to win two very significant contracts from new customers. The potential contract awards could be the catalysts to boost the Company's revenue growth outlook this year from "modest” to "significant” and propel its stock price to new highs.

DDS Wireless revenues are about 60% recurring from SaaS (Software-as-a-Service) type revenue streams. The Company reported that it has built a strong sales backlog for 2013 of $27 million. Q1 is generally the Company's softest quarter for sales, the fourth quarter usually the strongest.

DDS Wireless was the Investorfile blog's first name for our Top Ideas list – Small Cap Value Stocks (See: DDS Wireless: Buy for value, ride the growth). To date, the stock price appreciation has been more modest than our other Top Ideas, only returning about 20% (excluding dividends), but we feel strongly that this is about to change. Therefore we are still very comfortable with our initial stated value proposition that shares of DDS Wireless should be accumulated up to a level of $3.25 per share for small cap investors.

The Company continues to maintain a very strong balance sheet with $10 million in cash and marketable securities and no debt.

Two more positives: A share buyback was announced by the Company for 675,000 shares up to a stock price of $2.75. Last year DDS Wireless began paying its shareholders a $0.02 per share quarterly dividend.

The Company has only 13.8 million shares outstanding.

DDS Wireless' website address is www.ddswireless.com

Author's Ownership Position TSX: DD - Yes

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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. 

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The author of this article has acquired and may trade shares of DDS Wireless International Inc. through open market transactions and for investment purposes only.