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Feb
9
For growth investors: What’s not to like about RDM Corporation
Posted by: Gerry Wimmer
2/9/2014
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TOP IDEAS: With the stock up 161%, RDM Corp. (TSX: RC) is building value for shareholders by growing earnings, declaring a new dividend and eyeing acquisitions.



Investorfile’s 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.


When asked to comment about RDM Corporation (TSX: RC - $2.30), Peter Hodson, a well-respected Canadian small-mid cap investment guru from 5i Research, said on the Business News Network (BNN) that RDM has made a powerful statement to small cap investors by declaring its first quarterly dividend payout (See: BNN video clip). We agree with Peter Hodson and we predicted that RDM would generate shareholder value-enhancing announcements (a first dividend) in 2014. (See: Investorfile strikes big on 3 small cap predictions in 2013; declares 3 more for 2014 - Carry forward prediction #1).

RDM Corporation is a provider of Remote Deposit Capture (RDC) technology: specialized software and hardware products for electronic payment processing of 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.

So for investors what is next for RDM? To see forward, we look back first.

It was 5 months ago when the stock was already up 88% (as one of our Top Ideas) when we suggested that small cap investors should pay much more attention to the growth story occurring at RDM (See: Once a turnaround; now a growth story: More investors should tune into RDM Corporation.)

Now the stock is up 161%. Guess what? We still believe RDM shares are in the early stages of value appreciation.

Here are three reasons why:

  1. RDM stock is still reasonably priced for a technology growth company.
    For RDM’s fiscal 2014 Q1 results revenues grew 21% to US$5.8M, adjusted EBITDA was up 73% to US$1.1M and EPS grew to US$0.04 per share. Annualize Q1 results and RDM’s stock trades at Enterprise Value (EV) / EBITDA ratio at 6 times, which is inexpensive.

  2. Expect more shareholder value-enhancing announcements from RDM.
    Recently the Company declared its first annual dividend of $0.04, to be paid out quarterly. In the future, count on annual dividend rate increases. Also, RDM has stated its intent is making use of the Company’s available liquidity (US$19.3M in cash holdings) for acquisitions to accelerate growth.

  3. RDM market capitalization is on the rise.
    A higher market capitalization attracts a wider investor audience to the Company. More institutional investors will buy RDM stock which will drive up share valuation. 
We conclude this RDM blog post like our last RDM blog post by saying: 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.

Will we need to repeat this again in our next RDM blog post?

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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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.