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Sep
8
Once a turnaround; now a growth story: More investors should tune into RDM Corporation
Posted by: Gerry
9/8/2013
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TOP IDEAS: RDM Corporation (TSX: RC) shares are up 88% but still undiscovered by small cap investors.

 

  


Investorfileís share price accumulation target of $1.35 for RDM Corporation was reached on November 22, 2012. For the record, we do not revise share price targets for our Investorfile Top Ideas - Small Cap Value Stocks. We have positioned our blog to be one of the first providers of a pragmatic perspective of a small cap company stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.

We believe that small cap investors should pay much more attention to the growth story occurring at RDM Corporation (TSX: RC - $1.65).

RDM Corporation is a provider of Remote Deposit Capture (RDC) technology which integrates receivables and payment processing solutions using digital images of cheques. RDM payment solutions are utilized at five of the top 10 financial institutions in the United States. The Company processes over $600 billion in annual payments and serves 32% of the top 100 Fortune 500 companies including brokerage firms, big box retailers, healthcare and insurance providers, and government entities in the USA.

Since we first blogged about RDM in 2012 (See: RDM Corporation: Cash-rich small cap turnaround, offers value and opportunity) much has changed and the story is getting better. However, don't just rely on our opinion. Read (in the Q3 news release) what the Company's management is saying about the strong market acceptance occurring for both of RDMís Payment Processing Services and Digital Imaging businesses. Review the Company's latest Management Discussion & Analysis (MD&A) report and listen to RDMís investor conference calls. PS: Donít forget to look at the financials too. RDM adjusted EBITDA was up 60% to US $1.1 million last quarter.

RDMís share price is up 88% from the day we recommended the Company. But in our view, this stock is still undiscovered by small cap investors. Here is why:

  1. RDM is a Canadian company listed on the TSX. The Companyís payment processing systems have been deployed in the USA. Canadian investors are not familiar with this technology.
  2. RDM is cash-rich ($19.2 million), debt-free and generates strong cash flow. Small cap analysts gravitate to cover companies that require capital in order to generate financing fees. RDM requires no capital.
  3. RDMís market capitalization is currently $36 million, which is small for most institutional investors.

So what will attract small cap investors to RDM?

  1. Over time, the market will recognize the operating performance of RDM and true value will surface.
  2. RDM is looking to deploy its significant cash holdings on acquisition(s) to grow bigger.
  3. Both points #1 & #2 will drive RDMís market capitalization higher which will generate more interest from institutional investors and analysts.

Our conclusion is: Despite the increase in the value of RDM shares to date, the appreciation potential for this Companyís stock price is still stronger than ever. Based on RDM's 2013 fiscal Q3 results we encourage investing in unrecognized value ...... while it lasts.

RDM has approximately 21.3 million shares outstanding.

RDM Corporation website: www.rdmcorp.com.

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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Comments:
Posted by: Phil
I think the market will have a very positive reaction when RDM Corp. (TSX: RC) releases fiscal 2013 Q4 results later this month. I feel they could earn $0.04 - $0.05 per share in Q4 making RDM's current stock price very cheap, not to mention what they will do with their $20 million in cash. Gerry, this is your next pick that will make a big move this month. Keep up the great work!
Posted by: Mitchell
I agree with your comments on RDM Corp. (TSX: RC). This stock is still the best kept secret amongst the small cap tech companies in Canada. It is growing nicely, very profitable and the Company holds about $20 million in cash against no debt. It is worth at least $3.00 per share on a takeover. This stock is big gainer waiting to happen and it will happen soon.

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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.