ONVI - Onvia

[yadayada]

This is highest rated idea on VIC now, but I cannot read the thesis. Looked into the financials, and doesnt look like a bargain. Seems like this is key:

 

We developed a three-year business transformation plan and product roadmap in 2011 to leverage the Company’s investment in a rich public sector procurement database and execute on a strategy of transitioning the business from a low cost provider of government procurement information targeted at a large market of casual users to a high value and trusted partner to clients with a long-term strategic interest in the public sector.  We achieved the first product milestone to execute this shift in business strategy in February 2012 with the launch of “Onvia 5,” which improved the usability and “find-ability” features of the database.

 

Often these high rated microcaps are the most juicy on VIC :) . Anyone has more knowledge on this name? insiders have been buying up untill the current price. Looks like interesting things can happen with the margins here.

[yadayada]

Did some more reading. They are basicly a consultancy business for companies doing projects for the government. They help companies find government projects and help them prepare for them. Their database that they built up the previous years is suposed to be their moat and help them with that. They work on subscription basis with >1 year contracts. I dont really understand exactly how this works yet. That is why i hate b2b companies, so hard to figure out what is really going on :( . If I have to believe their 10k, their moat is significant tho.

 

But if you believe the above, 25-30% net profit margins should be possible from now on. As their costs are relatively fixed, their assets are software and their people. So any revenue that is added now mostly goes to the bottom line. They also have 72 million in NOL's. They are trading at roughly 20x 2012 earnings (was 1.6 million$). So if they would grow revenue by 10%, that is 1-2 million straight to the bottom. If you believe their business is really solid and it is likely they grow more in the future, then the stock looks pretty cheap right now. But i supose this is where it gets tricky. And some scuttlebutt research is needed to figure that out. Was hoping for the off chance someone here might have some direct experience with these guys :) .

 

Their balance sheet also looks v solid, so v little risk there.

[spartansaver]

Revisited this after seeing not much of a change in price. I really like the idea and revenues have steadily been growing. Also on a positive note their Annual Contract Value per Client (ACVC) has steadily risen every Q. This is especially good news when considering that their client base seems like it has bottomed out and their primary market is the majority of their revenues now. Clients were only down by 50 QOQ. It seems like they may be reaching an inflection point within the next year as most new revenues will go straight to the bottom line. Did some back on the napkin projections and although I believe their new client acquisitions have slowed their client losses should rapidly decelerate in the coming years. Recently purchased.