TOP IDEAS: RDM Corporation (TSX: RC) shares are up 88% but still undiscovered by small cap investors.

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 RDM’s Payment Processing Services and Digital Imaging businesses. Review the Company's latest Management Discussion & Analysis (MD&A) report and listen to RDM’s investor conference calls. PS: Don’t forget to look at the financials too. RDM adjusted EBITDA was up 60% to US $1.1 million last quarter.

RDM’s 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 Company’s 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. RDM’s 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 RDM’s 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 Company’s 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

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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 RDM Corporation through open market transactions and for investment purposes only.