Last August, when Fool co-founder Tom Gardner analyzed CD and DVD publishing system producer Rimage
That wasn't The Motley Fool's only favorable review. Back in October 2002, Matt Richey labeled the stock cheap at $8.95 a share.
Today the company recorded a new 52-week high of $18.30 a share on news fourth-quarter net income was up 26% (from last year's fourth quarter) to $.31 a share -- beating the company's previous forecast of $.20 to $.22 a share. What a concept: Higher stock prices with higher earnings.
Revenue, at $20.9 million, exceeded the company's forecast of $17.5 to $18.5 million. The company implemented a new growth strategy this year to pursue higher-growth opportunities in markets such as retail photography and medical imaging.
One stain on the company's fabric is insider sales -- a topic at the Fool's Rimage discussion board. There were nine sell transactions during the last six months and no purchases. Insiders own only 0.6% of the company, meaning it doesn't meet the Hidden Gems criteria of high insider ownership -- a way to ensure management's rewards are linked to those of the shareholders.
There is a lot to like about Rimage. It is debt-free and cash-rich (there is $5.26 a share in cash). The company expects next quarter's sales to increase from $14.4 million last year to $18.0 to $19.0 million. Net income is expected to grow from $1.8 million to the $2.1 million to $2.3 million range. Those are strong double-digit percentage gains.
The stock is trading for a reasonable 19.7 times trailing earnings. While that is not terribly undervalued, I'd argue the company's content strategy and recent distribution deal with Tech Data
The stock has risen 17.5% over the last 52 weeks -- more or less in line with the 18% increase in net income between 2004 and 2005. If things keep rolling as they have been, investors should look for a similar gain in the stock price in 2005.
While Tom Gardner did not make Rimage a Motley Fool Hidden Gems recommendation, he clearly saw promised that materialized. Care to see what he really likes? Try a free trial to the Motley Fool Hidden Gems newsletter.