Earnings for the year were very solid though unspectacular. Cash flow looks very nice. They have obviously chosen to invest cash flow in the DVD business rather than debt extinguishment. With current cash flow they could extinguish debt in under 2 years if they wanted. They are choosing not to. That indicates to me that they have sufficient confidence in the DVD business to invest cash there which is potentially good. Their guidance is from 10-20% Rev increase. 10 would be OK, 20 would be excellent. They are basically suggesting half increase from ATM and half from DVD. I am comfortable that they have a good grip on the ATM margin, don't know whether they really know the DVD margin yet.
Dawg conclusion: If they are wrong about the DVD margin, there is not a lot of downside, with the exception of the missed opportunity to pay down debt. However, downside on the stock price is limited. ATM performance at this point will maintain current performance and price. The fundamentals are very strong. If they are right about the DVD margin and can get to the upper end of their revenue growth target this could be a $2-3 stock by this time next year.
Very good analysis youget. I don't agree (as you already know) with your treatment of fixed SGA, but I don't know that it matters if the revenue comes in. IF there are any significant insider buys in the next few days that will clearly be a good sign. I am still in a wait and see mode with regard to DVD performance. I hope your analysis is correct........ will be very profitable for me.
Not an unreasonable scenario on your part. I just think there's a much better chance that we are going to stay in a trading range between 80 cents and $1.50, over the next 12 months. Overall, a modest upward bias. The DVD ventures adds both RISK (from lack of debt paydowns, and commitment of capital) AND REWARD potential. But, based on the number of machines going out, it's hard to see any material contribution to income this year. And I'm still expecting Fed Funds increases to start, in earnest, by the 4th quarter of this year...and really start ramping up next year.
I don't know what the revenue potential from a Kiosk is but my guidance says between 5 and 10 percent this year. 5% is material. Clearly choosing this KIOSK path is riskier but it seems appears to me to be a very logical extention of the business in many regards. "Prudent risk taking" is IMHO what successful capitalists do. Don't you think.