Nice quarter. Unfortunately, they kinda threw cold water on it with this gross margin outlook:
The Company monitors gross profits and gross profit margins carefully. Price competition in our market persisted in 2013. Although our total gross profit margins improved slightly in 2013, we anticipate that margins, as well as discounts and rebates, will be under pressure in the near future.
My guess is they continue a dividend, but certainly not at the current .07/share per quarter rate. Earnings will be below that so it would be kinda stupid to pay such a large dividend while earnings are suffering.
Dream on! I'm sure management is unloading nearly all of their holdings in the $6's (including another 22,000 share block last week at $6.46) because a buyout is coming. Too funny.
Why would anyone be interested in RFIL now that Optiflex is finished? Revenues and earnings are going to begin their plunge in Q1. Revenues down 40%. Earnings down 50-75%. Yeah, someone might buy them...at $1.50/share for the balance sheet.
Everything I said was publicly known when the stock was over $10 too. And the longs were fighting me then. I told them how the company was going to start reporting flat to declining revenues & earnings. I was expecting the stock to drop back to $6-$8. But even I'm shocked when they said Optiflex would be slowing substantially going forward. This is a whole new ballgame. Instead of earnings of .10-.15 per quarter. Earnings will drop to .01-.05 per quarter. And that's IF they stay profitable.
Yes RFIL was undervalued in the $4's last year when they were reporting good earnings with a bullish outlook. Now it's extremely overvalued when they're set to report a 35-45% revenue decline in Q1. Earnings will probably be down 50-75%! If you like buying stocks with bad news, you've found it! There is a lot more bad news on the way. Keep buying all the way down!
I've followed RFIL for years. A lot of people are looking at the good numbers of the last 4 quarters. What they need to be focusing on is the forward outlook. RFIL's success of the past 6 quarters was due to ONE product. Optiflex. That one product had zero competitors. No longer the case. Demand slowing too. Problem when you rely on one product for a big chunk of your revenues. And this is a recipe for disaster. The stock will crater when they report those horrible Q1 results in March. See ya in the $4's!
But the price hasn't begun to reflect the bad news at all. A year ago, RFIL could be bought in the $5's. I remember because I was buying it. Management couldn't unload shares fast enough. It was puzzling as the company was reporting excellent increases in revenues and earnings. But the worrisome thing was...at $6, RFIL was trading at the highest it ever had on any chart I could find. Check the charts. RFIL has spent most of the past 13 years trading between $2 and $4.
Enter Optiflex. RFIL has a new product. It has zero competition. And good demand with the 4G buildout. RFIL has 6 great quarters in a row. But now hear comes the problem. Demand is slowing dramatically as the buildout is nearly completed. Even worse, there's several competing products now. Not only will Optiflex sales take a big hit, but so will gross margins as they have to undercut prices to keep pace with the competition. This certainly is not a problem that will be fixed in a quarter or two. Can RFIL survive? Yes! But things are going to get MUCH worse for them over the short-mid term. I don't even know if they can maintain profitability. And this most def has NOT been reflected in the share price. Yet.
Um yeah, good one?
Still waiting for anyone to show me the long argument. I would love to know why anyone in their right mind would buy a stock right before they report a string of disastrous quarters. RFIL a year ago was trading BELOW where it is now. When the company was reporting sharp increases in revenues and big earnings. Now they're going to be reporting huge revenue declines and earnings of a few pennies per share. Mind boggling that anyone would buy this over $4.
Optiflex 10K info cont...
Furthermore, as the availability of these competing products increases, the price of the Company’s cell tower cable may have to decrease in order to remain competitive. Accordingly, the introduction of competing products has recently affected the Company’s revenues and profits that it currently derives from its custom cable product line. The Company has noticed a material decrease in orders for this cabling product since the end of the 2013 fiscal year due to a decrease in demand for the product and the need to retrofit same cell towers, and to a lesser extent to newly introduced competing products. The decrease in orders for this cell tower cabling solution is expected to materially affect the amount of future net sales that the Company generates from this product. In addition, no assurance can be given that wireless carriers will continue to use the Company’s custom cable solution over the longer term.
Had a nice run of 6 quarters...but that's now OVER. Anyone buying here clearly does not understand the importance of Optiflex. It was THE driver of revenues & earnings the past 6 quarters. Before that, RFIL was earning a few pennies a quarter and trading at $2-$4. Headed back there soon. Straight from 10K:
A Significant Portion of the Increase in the Company’s Net Sales and Net Income is Due to the Sale of a Single Product, Which Sales May Not Continue Over the Longer Term.
Net sales for the year ended October 31, 2013 increased $8.9 million from the comparable prior year period. Of this increase, $8.2 million is attributable to the sale of a single line of custom cables manufactured by the Company’s Cables Unlimited subsidiary. This product, which was commercially released in April 2012, is a specialized solution for wireless carriers who are updating their networks to 4G technologies, such as WiMAX or LTE. The custom cable product is only used for retrofitting cellular telephone sites and, therefore, its sales are directly tied to the number of cell sites that are retrofitted by the wireless carriers and to the number of wireless carriers that choose this solution. Any decrease in the number of cell sites that are being retrofitted, or that are in need of updating/retrofitting, will directly reduce the sales of the product. The Company is unable to estimate how many cell sites will be updated, and how many wireless carriers will choose to use the Company’s custom cable solution for their updated cell sites. The Company believes that its cell tower cabling solution was the first such solution that was commercially released. However, other competing products have recently been introduced that compete with this product line and, as a result, the Company’s net sales of this product will decrease when carriers choose those competing products for their own cabling solutions.
Instead of calling names, why don't you find ONE reason it makes sense to be long a stock whose fundamentals are crumbling. Take your time.
Did you not see the guidance in the earnings PR? Or listen to the CC? RFIL had 5 or 6 great quarters because of their new product Optiflex. But that is now over. Optiflex used to have zero competition. Now they have competition. And to make matters worse, demand is slowing. On the CC they said the 4G buildout is nearly finished. Revenues and earnings for RFIL are going to plunge. The company has said so. Q1 earnings will be a few pennies a share. Q2? They may not even be profitable. Dividend will be slashed. Don't know who in their right mind is buying over $5. If you like the company, wait til it's under $4 this summer.
Last Thursday, Doss sold 22,000 shares at $6.46. What does that tell you? Company is telling you revenues & earnings are about to nosedive. He's gladly selling in the $6's. When they report those ugly Q1 numbers, stock will be in the $4's.
Because I'm short duh. Look back at my posts. I've called this exactly right! Any longs should take today's small bounce as a gift selling opportunity. RFIL numbers are about to nosedive. And it isn't a 1 or 2 quarter problem either. The company's Optiflex was a cash cow for many quarters. But that's now OVER. I've been long and short RFIL. The time to go long was a year ago at $6 when they reported big increases in revenues and earnings. At the time, the stock was at all time highs. So anyone who thinks the stock price is low needs to pull up the chart back to 2003. RFIL is actually very expensive historically! That's why insiders were unloading around $6 last year. They knew this was coming. And that's why RFIL's stock price will continue to sink much further as revenues & earnings crumble.
Um WHY? With thousands of companies available that are showing good growth...why buy one that is about to report huge declines in revenues and earnings for the next few quarters? RFIL will make another leg down after the Q1 report when they report earnings of .04/share. .04 X 4 quarters and a 10 P/E means the stock is worth $1.60. I'll generously add $2 for the balance sheet and that gets you $3.60. Why anyone would touch this in the $6's is beyond me. To many people see it was over $10 and think Gee it must be a good buy because it's down. Nope! The fundamentals will start deteriorating quickly. RFIL was trading at $6 a year ago when they were reporting strong growth. And insiders were unloading. Now we know why!
I thought for sure stock would see $5's today on that ugly guidance. Very surprised it's up. Guess a lot of people are looking at the good annual numbers, and not focusing on the rapidly deteriorating fundamentals going forward. Dividend will also be cut sharply. No way can they continue to pay out .07 a quarter when earnings will be below that...and business outlook is poor.
NO they didn't say that! Said something about dividend and/OR buybacks. Could be one or the other. My guess is they'll buy back some stock when it drops to the $4's. I think they'll continue a dividend too. But it def won't be at .07 per quarter when earnings will be below .05 per quarter!
We'll see. I think it's only the tip of the iceberg. Earnings might be bad for several quarters. Their cash cow Optiflex is toast. Reduced demand AND increased competition. Material declines in revenues. Material declines in earnings. This doesn't sound like a 1 quarter problem. We'll see what they say tomorrow.
Stock really crumbled into the close. Told you guys it was still a great short over $7. Why are you buying before the stinky earnings and horrible Q1 guidance? Business is going to get MUCH worse, which is why the stock is still expensive in the $6's. The dividend is nice, but is sure to be cut as quarterly earnings drop from .10-.15 per quarter down to a few pennies per quarter.
That's the scary thing. Q4 was mediocre to begin with as revenues dropped to $8.4M. Now they're expecting "material" sequential declines from there! Material declines sure doesn't sound like 5-10% to me. Sounds more like 20-30%. It will be an ugly quarter. And I don't know how anyone reading that horrible guidance can come away thinking this will be a temporary issue. Anyone who can sell near $7 should do so and thank their lucky stars! RFIL will below $5 by summer.
What you're not getting...the stock is down for good reason. Revenues and earnings are about to start dropping off a cliff. Optiflex has been their cashcow in recent quarters. And Optiflex sales are slowing "substantially". Double whammy of reduced demand and increased competition. You'll remember for awhile Optiflex had ZERO competition. That is no longer the case!
RFIL stock traded most of last year in the $6-$7 range...when the company was reporting great numbers! So why would it trade at $8 or higher when earnings are about to plunge?? Now we know why insiders were unloading around $6. My guess is we'll see RFIL in the $4's after the ugly Q1 numbers.