Please help me if I am missing anything...They have a huge deferred tax asset which means they will not be paying taxes for quite a while, but for the current year it appears they will earn about $9 million on a pre-tax basis. IF that were fully taxed (which is the way one typically values earnings for PE multiples etc.) that would leave about $6mm or about $.10/share. At $2.70 that means they sell for 27 times earnings, which seems pretty rich given that their earnings are down this year?? I like the business and their strong position, but at a 27PE one would need 20-25%p.a. growth to justify the current price, much less make it attractive??
The p.a. growth rate is currently around 15% and dropping. What you didn't mention was that much of zix's growth is because of OEM contracts. This has a very bad downside in that the OEMs are giants who can dictate terms to zixi and squeeze them.
Also, email encryption is a dying horse. Google provides free email encryption to its subscribers. Anyone that really needs it has it. Zix had a good run because of health mandates. That is just about over.
Zix Corporation provides email encryption solutions in the software as a service model in the United States.
Zix Corporation has no debt at all and it has a very low trailing P/E of 8.26 and a low forward P/E of 13.38, the PEG ratio is extremely low at 0.41. The price to free cash flow for the trailing 12 months is very low at 13.01. The average annual earnings growth for the past 5 years was extremely high at 50.83% and the average annual earnings growth estimates for the next 5 years is also very high at 20%. The company is trading 17.6% below its 52-week high and has 63% upside potential based on the consensus mean target price of $4.58. Analysts recommend the stock, among the four analysts covering the stock, one rates it as a strong buy and three rate it as a buy.
On October 23, Zix Corporation reported its 3Q financial results (here), ZIXI beat estimates on revenues and was in-line on EPS.
Third Quarter 2012 Financial Highlights:
Third quarter new first year orders of $2.6 million, including a one-time catch up of approximately $300,000.
New first year orders for the nine months ended Sept. 30, 2012, were $6.8 million compared to $5.2 million for the same period last year, representing 31.0% year-over-year growth.
Third quarter revenue of $11.0 million, an increase of 15.3%, year-over-year, the Company's 15th consecutive quarterly record in revenue.
Third quarter GAAP net income of $0.03 per share, a decrease of 18.9%, year-over-year.
Third quarter Non-GAAP net income of $0.04 per share, an increase of 3.6%, year-over-year.
The Company generated approximately $4.6 million in cash flow from operations, a decrease of $0.1 million, year-over-year.
Cash and cash equivalents totaled $23.0 million, an increase of $4.2 million compared to the June 30, 2012, ending cash balance.
The cheap valuation, the strong growth prospects, the analysts' recommendations and the positive 3Q financial results are all factors that make the ZIXI stock quite attractive.