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RDM Corporation keeps delivering returns for small cap investors
Posted by: Gerry Wimmer

TOP IDEAS: Year-after-year the stock price trends higher and the dividend payout gets bigger. Total investment returns have reached 550% for shareholders of RDM Corporation (TSX: RC) with more to come.

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 Ė Small Cap Value Stocks. We have positioned our blog to be one of the first providers of a pragmatic perspective of a small cap companyís stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.

There is a saying that the only thing guaranteed in life is death and taxes. Maybe "a higher stock price for shares in RDM CorporationĒ should be added to this phrase.

The Investorfile blog considers itself one of the very first (if not the first) documented opinion providers on the merits of investing in the shares of RDM Corporation (TSX: RC - $4.55), post its turnaround. (See: RDM Corporation: Cash-rich small cap turnaround, offers value and opportunity.) Since that first post on January 2, 2012, the Investorfile blog has written up 10 investment updates on RDM Corporation over a five-year period. Over the same period the stock price of the Company has progressively grown higher in value each year, and 2016 should be no exception.

The key revenue growth driver and cash generator over the past five years for RDMís business is its payment processing services, based on Remote Deposit Capture ("RDCĒ), a deposit-taking mechanism that uses technology to capture cheque images and data at corporate or merchant sites for the electronic transmission of these deposits to a financial institution. US Financials have steadily increased the deployment of RDC technology and, in particular, RDMís Image and Transaction Management Systems ("ITMS®Ē) software to enable the elimination of many costly cheque processing steps while, at the same time, opening the door for new and improved service offerings to its commercial customers.

For each ITMS® seat deployed (the data capture point), RDM earns transaction and license revenues for cheque images to be processed. At the end of fiscal 2016 the Company had 48,706 ITMS® seats deployed, up 9% from a year ago. This growth rate of ITMS® seats deployed has been consistent over the last five years and is expected to continue from existing financial customers expanding their deployment, first-time bank customers rolling out RDMís system in 2017 (new contracts already signed) and from a strong pipeline of new customer request-for-proposals (RFPs) by US banks and financials.

About 70-75% of RDMís total revenues are recurring, derived from its high-margin payment process services for US financial institutions. As this business continues to grow so does the cash that the Company generates. In fiscal 2016, RDM Corporation generated US$6,326,000 in cash from operations compared with US$5,271,000 in 2015 and ended the year with US$31,047,000 in cash and cash equivalents on its balance sheet with no debt.

The balance of RDMís revenues is earned from the sale of digital imaging products, the front-end hardware data collection device that scans cheques. Though hardware sales were down in fiscal 2016 the Company expects its digital imaging products sales to rebound in fiscal 2017 with new product releases and from new distribution channels. The increase in hardware sales will add to RDMís profitability.

Since the Investorfile blog first recommended investing in RDMís stock, small cap investors have enjoyed a total return (including dividends) of 550%. That said, we feel the investmentsí returns will continue to build in 2017.

Here's why:

  1. RDMís payment processing business is positioned to continue to grow in 2017, which will drive more profit growth and therefore a higher stock value.
  2. Since introducing a quarterly dividend in January of 2014, RDM has increased its dividend rate annually. Expect another dividend increase in 2017.
  3. Still pending is the deployment of RDMís significant cash holdings for a potential acquisition(s).

RDM Corporation has approximately 22.6 million shares outstanding.

Company website:

Author's Ownership Position: TSX: RC - Yes

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. 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, Just a quick note to thank you for the info about the companies profiled on your page. I was a bit ''''late'''' to the Sangoma party but am doing very nicely with it (even if not >500%). I am considering whether to put some money in some of the other companies-- Answer: My top picks for 2018 are still ITC, STC and PAY. Gerry Wimmer