Ticker: (Nasdaq: PUMA)
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How Did it Double?
Puma Technology's stock has looked much like that of the animal it named itself after -- fast, aggressive, and willing to scale cliffs to dizzying heights.
There isn't any single reason that has caused the company's shares to move up, but rather a confluence of trends have piqued the investment community's interest. Puma has found itself riding two of the hottest trends of late -- wireless data transfer and mobile computing -- and the company's position as the leading provider of data synchronization products for these two markets has become quite valuable over the past year.
Puma hasn't yet seen any meaningful profits from the increased interest in the company's products, but that hasn't stopped the stock from being dramatically bid up in anticipation of a brighter future. It's fairly amazing to look back and see that Puma started the year trading barely above $3 a share. Pull up a quote on Puma today, and it should be evident that longtime shareholders in the stock are smiling ear-to-ear since Puma is among the best performing stocks of 1999.
Business Description
Based in San Jose, Puma Technology is a leading provider of products that allow mobile computing devices to connect to and synchronize with networks and databases. For example, Puma's Intellisync product gives devices like 3Com's (Nasdaq: COMS) Palm Pilot, so-called "smart phones," and other mobile wireless devices the ability to connect to the Internet and other private networks.
Most of Puma's sales are to Original Equipment Manufacturers (OEMs), which then bundle the software with their mobile computing products.
Financial Facts
Income Statement How Could You Have Found This Double?
Hats off to those who found Puma early enough to ride the shares to a 20-bagger this year, since finding this one was no easy task. Through the early part of the year the company actually reported slowing sales and negative operating income. Only in the last quarter or two has the financial picture has started to look up with sales and profit growth returning to the company. Investors solely focused on the financial statements never would have found Puma, and this is a case where those looking at the company's strategic positioning would have been much better off.
Puma's products turn Palm Pilots and smart phones into much more productive items, allowing users to "stay connected" no matter where they might be. Puma's Intellisync product is as close as anything to being a standard in this area, and that puts the company in a pretty sweet position as these devices continue to proliferate.
Where to From Here?
Judging from where the company is today, it looks like both top and bottom line growth are in the cards for at least the next few quarters. Smart mobile phones and palm computers with connectivity capabilities are a relatively recent phenomenon and have yet to really penetrate the mainstream. When these devices start to be used by the masses, Puma's synchronization products are sure to be used by a relatively large number of consumers. In other words, Puma is set to greatly benefit by the expected hyper growth of its target market.
That said, much of this optimism is already priced into the stock, which now trades at over 50x trailing sales. This is an extremely rich valuation no matter how you look at it, especially considering that the company's trailing sales come without profits.
Looking at the balance sheet, Puma's is as clean as they come with excess cash and essentially no debt. Put this together with Puma's high-flying stock and it would not be surprising to see the company go on an acquisition spree. One of the benefits of having a highly valued stock is that the shares can become valuable currency for buying other firms. Just last week Puma announced that it would acquire NetMind Technologies, a "leading provider of Internet infrastructure software for personalization."
Even though looking at Puma's past performance one might think today's valuation is nothing short of insane, it's the future cash flows that determine stock prices, not the past. Even so, Puma still looks to be valued on the extreme high end of the spectrum. The company is expected to earn $0.15 per share in the coming year, which still puts the stock at several hundred times its forward estimates. With the stock trading at such stratospheric levels, the company has to show some explosive and sustained growth to just come close to justifying today's price. One might say that Puma has some mighty big shoes to fill.
Phone: 408-321-7650
Website: www.pumatech.com
Price (12/10/99): $94 1/2
12-month sales: $21.9 million
12-month income: ($2.9 million)
12-month EPS: ($0.21)
Profit Margin: N/A
Market Cap: $1269.6 million
Balance Sheet
Cash: $10.0 million
Current Assets: $30.8 million
Current Liabilities: $8.5 million
Long-term Debt: None
Ratios
Price-to-earnings: N/A
Price-to-sales: 58
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