Looking for a Low-Priced Stock Play? I May Have Just the 'Weapon'
An interesting name is set to report earnings, and odds are you've never heard of them. Here's what to know and a strategy to trade the shares.
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It gets really quiet, at least as far as corporate news is concerned, just ahead of the unofficial kickoff of yet another earnings season. That said, the "earnings off-seasons" do appear to be getting shorter and shorter as the headline-level stragglers appear to be multiplying in recent years, which stretches the season out.
The big banks will kick the season off this Friday, though Delta Air Lines DAL and PepsiCo PEP will report on Thursday. It takes a couple of months, but the retailers are thought of as the tail end of earnings season, yet a number of well-known tech names do report well after the retailers.
All that said, I think I may have an interesting, if not yet profitable name to introduce to you today. I have not yet made my mind up about this name. Perhaps, we can work through this one together. So, without further adieu, shall we move forward, my friends?
Who the Heck Is Byrna Technologies?
Byrna Technologies BYRN is an Andover, Mass.-headquartered corporation that specializes in the development, manufacture and commercialization of less-lethal personal security solutions. The company's portfolio of products includes both handheld devices and shoulder-fired weapons designed for both consumers and professional security providers. Byrna also offers a line of projectiles, chemical irritants, kinetic rounds, inert rounds, and aerosol products including "Bad Guy" repellent.
The company's flagship product, the Byrna SD, is a compact, ergonomically designed personal security device about the size of a compact handgun that fires accurately within 50 feet and returns almost no recoil to the user. One would think that perhaps with crime, and especially violent crime, having become the issue that it is across the nation, that there may be increased demand for non-lethal ways to defend one's household.
Earnings
Byrna Technologies is expected to release its second-quarter financial results ahead of Tuesday's opening bell. The stock is not highly followed, but across the three sell-side analysts that cover the name, the average expectations are for adjusted EPS of $0.03 or a GAAP loss per share of $0.01 on revenue of $20.3 million. That would compare to a GAAP loss of $0.05 per share on revenue of $11.5 million for the year-ago comps.
For the first quarter, the company posted adjusted EPS of $0.05 (GAAP EPS ($0.00) on revenue of $16.7 million. In short, Byrna experienced year-over-year revenue growth of 98% for Q1 and is looking for year-over-year revenue growth of 121% Tuesday morning for Q2.
Balance Sheet
Of course, we'll get an update on this in less than 24 hours. That said, as of February 29, three months prior to Tuesday's numbers, current assets amounted to $38.971 million, including a cash position of $24.176 million and $12.128 million in inventories. Current liabilities ran at just $8.367 million, including deferred revenue of $2.595 million and no short-term debt.
This puts the current and quick ratios at 4.66 and 3.21, respectively, which is stronger than strong. Once adjusting for those deferred revenues, which are not true financial obligations, these ratios rise to an incredibly robust 6.75 and 4.65.
Total assets amounted to $52.742 million, including goodwill and other intangibles of $5.768 million. At roughly 11% of total assets, this was not a problem. Total liabilities less equity came to $9.573 million, which included no long-term debt either. That's right... cash of more than $24 million with no debt-load. This balance sheet was a pleasure to analyze.
My Thoughts
Obviously, this is a speculative play. Of the entire float, 6.5% is held in short positions, which is enough to notice, but probably not enough to be a factor in my decision-making process.
The company is on the verge of doing more than breaking even sustainably. The balance sheet, for its size, is fortress-like. In my opinion, the company is filling what there is currently an acute need for in many states at this time.
Readers will see that BYRN bottomed at $2.19 back in late September, then stormed all the way to a peak price of $15.34 this past April. As the shares sold off from that point to where we are now, support was found at roughly the "half-way back" point in June. Now, along comes the 200-day simple moving average (SMA), currently at $8.73 to reinforce that spot where potential help for those long the stock may rest.
Relative Strength is neutral but rising. The daily Moving Average Convergence Divergence (MACD) is in pretty bad shape, but the 12-day exponential moving average (EMA) has curled above the 26-day EMA and that is the first step in any upside MACD correction.
What I am thinking right now, is that holding onto the 21-day EMA will hold onto the "swing" crowd. That would put the 50-day SMA in play as a potential pivot. In a perfect world, that unlocks the possibility for a run at last year's highs, but the trader really only needs to see $12.50 or so for a successful trade. As for downside protection, simply hold oneself to the 8% rule. That would be an out at $9.50 or so if the trade fails.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
