Under the old practice, the false claims go away after they are litigated in court and won by the police after spending $20,000 of police resources and legal fees to fight those claims. Those claim costs add up. That's why the benefit/cost ratio of the cameras in the Rialto, CA study was more than 8:1 (payback in less than two months).
Mr. Smith was doing the ethical thing. First, he only talked about sales, which is a top line item, not earnings, which is a bottom line item on the income statement. Second, the SEC would have been all over Mr. Smith if he pre-announced.. Third, the consensus EPS estimate by Wall Street is not gospel but the average of their guesstimates of what the company will do. The fiscal fourth quarter results of any company is a SWAG as that is where they put all their accounting adjustments for the year if they didn't do it in prior unaudited quarters in that year. What you should be doing is looking at accounts receivable, which indicates sales in the next few quarters. That was up 36% from the prior year. Flex cameras units sold in 2014 were up 105% and body cameras were up 600%. They're doing okay.
Tasers sold: 775,000 to 17,800 agencies in 107 countries. Body cameras: 1,200 agencies using 30,000 body cameras. London pilot ends in April.
In two to three years, TASR may be making a dollar in EPS. Throw whatever multiple you want on that to get a price. As for the S&P 500, it changes all the time. Jim Cramer discussed the S&P 500 recently. It evolves, improving itself by replacing laggards with growing companies. Companies in the Index that are acquired are purchased at a premium to market, so the Index rises from that activity. Take some of that inheritance and place it in Vanguard's 500 Index. It has a very low expense ratio (0.17%) and performs better than most mutual funds. The S&P 500 Index outperformed six of seven mutual funds in 2014 and has outperformed the average mutual fund for six consecutive years. If you buy individual stocks, buy those that are paying a dividend. One company has been increasing its dividend annually for about 58 consecutive years (yes, even through the Great Recession); many others have been doing so for 20 straight years. Dividends represent about 40% of total return. Good luck.
If you took an accounting course you would know that orders (bookings) are not reportable sales. And sales of these cameras are spread over quarters, not weeks. The LAPD order is scheduled to be completed by the summer of 2016. You don't manufacture 7,000 cameras in a few weeks.
Using preliminary data supplied at TASR's recent conference call, the inventory adjustment amounted to $0.04 EPS in 4Q14. Thus, if TASR did not write down inventory, its reported EPS for 4Q14 would have been $0.13, or two cents ABOVE consensus. Companies take their hits in their fiscal 4Q to clean up their balance sheets to prepare for the new year. Its operating margin declined 50 basis points in 2014 to 19.8%, its tax rate jumped to 38.4% and its cash conversion cycle increased 17 days to 104. The best thing management can do is issue debt while interest rates are low. The company's debt/capitalization is less than 1%. They should do a little leveraging while rates are low. That way they can boost the 16.8% ROE a little bit. Some leverage is a good thing.
775,000 tasers used by 17,800 agencies in 107 countries is not illusive. Those relationships as a proven supplier make it far easier to cross sell than for someone new coming through the door. As for shares, they increased a mere 0.6% YOY (fully diluted). And he boosted R&D to 9% of sales to remain competitive. You gotta spend money to make money.
And 775,000 tasers used by 17,800 agencies in 107 countries is a waste of time. What TASR had developed is relationships with these organizations where they will look at new products from a proven supplier with a less skeptical view than toward someone brand new.
Fourth-quarter results are a flip of the coin. Who knows who decided within TASR to take a $2.1M write-off of outdated inventory. It could have been the CFO. And the Wall Street consensus is not gospel. They are flipping a coin too.
At $31 price, a $0.52 EPS estimate for 2015, and a growth rate of 41% yields a PEG ratio of less than 1.5. TASR is reasonably valued.
The LAPD contract will not be completed in the 1Q15 but over several quarters. As TASR delivers units, that is when the company recognizes revenue and profit. The analysts estimates are so low because they don't know the company. Even when TASR has reported three consecutive quarters of at least $0.13 EPS per quarter on an unadjusted basis, the high analyst's estimate for 2Q15 is $0.10 and the average is only $0.08. They are clueless.
Well, what do you know? The high estimate for 2Q15 has increased to $0.12 while the average has increased to $0.10, all since earlier this week and well after the CC last week. Some analysts(s) on Wall Street is (are) getting with the program.
And save them even more money in reduced legal and lawsuit costs. The Rialto, CA PD study indicated a benefit/cost ratio of 4:1. Follow-on analysis noted a benefit/cost ratio exceeding 8:1. All of these PDs buying cameras can't be wrong. London Metro, who selected TASR cameras, studied body cameras for 18 months. LAPD analyzed three alternative cameras before selecting TASR's.
DGLY's 10-Q for 1Q15: Yikes! Cash down 25% in quarter, even after receiving $3M from converting convertible notes and exercising options and warrants. Accounts receivable flat, inventory up, stock outstanding increased by about 50%. CGS up 63% YOY while gross profit down 28% and G&A up 35%, contributing to more than a triple in operating loss. Good luck.