TISA - Top Image Systems

[ValueSlant]

TISA is a very under the radar microcap software company that looks cheap right now. My main issue with it is just not sure how much conviction one can have in the stability of their top line. I did an overview here:

http://valueslant.com/2011/12/22/image-systems-tisa-cheap-microcap-software-company/

 

Curious if anybody else has looked at this one.

 

ValueSlant

[Baoxiaodao]

TISA is a very under the radar microcap software company that looks cheap right now. My main issue with it is just not sure how much conviction one can have in the stability of their top line. I did an overview here:

http://valueslant.com/2011/12/22/image-systems-tisa-cheap-microcap-software-company/

 

Curious if anybody else has looked at this one.

 

ValueSlant

 

VS, thanks for the idea. I looked at your write up and here are a few comments. Don't feel offended. I read a lot of your posts.

 

1. My experience with small software company was not good. Unless the technology is disruptive and superior, the chance to gain meaningful market share is small. Also, it requires the majors to overlook this sector. So if a small software company is not in a small niche, the life will be tough.

2. The valuation is not cheap enough, in my opinion. 6x EBIT is OK for a small software company, but not very appeasing.

3. In my opinion, your ideas have all the good elements, like good analysis and relatively cheap valuation. However, I do believe you have the ability to find even cheaper things. Only extremely cheap price makes a good investment.

 

 

[ValueSlant]

TISA is a very under the radar microcap software company that looks cheap right now. My main issue with it is just not sure how much conviction one can have in the stability of their top line. I did an overview here:

http://valueslant.com/2011/12/22/image-systems-tisa-cheap-microcap-software-company/

 

Curious if anybody else has looked at this one.

 

ValueSlant

 

VS, thanks for the idea. I looked at your write up and here are a few comments. Don't feel offended. I read a lot of your posts.

 

1. My experience with small software company was not good. Unless the technology is disruptive and superior, the chance to gain meaningful market share is small. Also, it requires the majors to overlook this sector. So if a small software company is not in a small niche, the life will be tough.

2. The valuation is not cheap enough, in my opinion. 6x EBIT is OK for a small software company, but not very appeasing.

3. In my opinion, your ideas have all the good elements, like good analysis and relatively cheap valuation. However, I do believe you have the ability to find even cheaper things. Only extremely cheap price makes a good investment.

 

Thanks for the comments!

 

1. I agree. It is tough for a small enterprise software company to compete with the goliaths that have themselves bought out many smaller companies and have a very wide product set and huge sales network. It seems like most of the value to public shareholders only comes when a larger company gobbles these smaller guys up. The writeup on TISA actually wasn't a buy recommendation mainly for the reason you mention, sorry if that wasn't clear. I only would recommend buying stocks I have bought myself.

2. Everyone has their own view on what is cheap enough, but it is worth noting in this case that EBIT should equal FCF for at least the next few years due to no interest expense and NOLs. If I was more confident about the sustainability of revenues I would say less than 6X FCF is pretty cheap for this business.

 

ValueSlant

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