GEO Investing

A Monthly Review of GeoInvesting’s Most Notable Activity — GeoInvesting February 2016 Newsletter

Omegaphoneur Calls to Action

Money-making Moves that the GeoTeam Conveys to its Premium Members

  • February 12, 2016 — Educational Development Corp (NASDAQ:EDUC) Announced record January 2016 sales of $4.7 million vs. $2.0 million in the same month 2015. We reminded members to watch for a bounce after the market sell off in February. The continued surge in sales is being driven by the increased number of MLM sales associates.  EDUC added 1,200 associates in January to bring the total to around 18,000 compared to 7,900 at the same time last year.  The company also disclosed that the larger distribution facility it acquired to accommodate surging sales would be operational on 2/15/16.  Further, the company’s current facility that was previously for sale has been taken off the market as management determined it would be required to accommodate increased operational requirements.
  • February 10, 2016 — Elizabeth Arden Inc. (NMS:RDEN)We published a research report on 7/28/15, when RDEN was trading at levels over $10, stating that we saw 52% downside in the stock with a potential insolvency scenario. Our concerns about the company and its floundering turnaround efforts were vindicated when the company reported disappointing results for fiscal Q2 ended December 31, 2015.  Our reading of the situation is that there is more trouble ahead for RDEN as the company burns through cash making future dilutive raises likely.

Information Arbitrage News

News Before the “Rest of the World” Finds Out

  • February 2, 18, 22, 24 and 29, 2016 – NV5 Global Inc. (NASDAQ:NVEE) — This is a classic example of the market not pricing in good micro cap news on a timely basis. On 2/2/16, NVV announced the all cash, immediately accretive acquisition of Sebesta.  Our pro forma financial modeling indicates the acquisition should add over $35 million to NVEE’s 2016 revenue and $0.16 per diluted share to 2016 EPS.  We currently estimate 2016 EPS at $1.50, above other analysts who have been slow to bake the acquisition news into their estimates.  The company is also growing organically evidenced by recently announced contract wins here and here.  We published a bullish article on NVEE on 2/18/15. On February 24, 2016 Geo Co-Founder Maj Soueidan was the main guest on a featured radio show, “The Everyday Investor” on 740 AM in Boca Raton, FL.  Maj interviewed Dickerson Wright, Chairman and CEO of NVEE.  An audio replay is available here.
  • February 2016 — BG Staffing Inc (AMEX:BGSF) — Another case of the market being slow to respond to micro cap news of strong performance and the accretive impact of acquisitions on a timely basis. On 2/1/16, BGSF reported preliminary full year 2015 results together with pro forma combined data including two acquisitions that took place during the year.  Our financial modeling indicates analyst estimates will have to be increased as the impact of the acquisitions and organic growth become apparent during the course of 2016 and the share price should follow suit.

Top Performing Picks

Picks that GeoInvesting is Particularly Proud Of

  • February 19, 2016 — Electromed Inc. (AMEX:ELMD)Shares have risen over 30% since we took a position at $3.73 on 2/19/16. ELMD develops, manufactures and sells innovative products that provide airway clearance therapy, including the SmartVest® Airway Clearance System and related products, to patients with compromised pulmonary function. We like medical device companies (such as REPR) that capitalize on the rapidly growing demand for in-home care products. The company easily beat analysts’ estimates in fiscal Q2 2016.  See our 2/19/16 report.
  • February 1 and 3, 2016 — Repro-Med Systems Inc (OOTC:REPR)In January we alerted subscribers to the aggressive open market purchases of REPR by Joseph Manko of Horton Capital Management. Since 1/19/16, Mr. Manko has filed six Form 4s including two in February (here and here) reporting open market purchases of over 728,000 shares (average price $.47 and aggregate cost around $344,000) bringing his total holdings to over 4.6 million shares or approximately 12% of the total outstanding.  REPR as a stock has started to follow Mr. Manko’s lead with the shares recently attaining a new high of $0.58.


GeoBargain Updates

Additions & Subtractions of GeoInvesting’s Best Picks

  • February 10 and 23, 2016 — Meritage Hospitality Group (OOTC:MHGU)Reported preliminary 2015 results and 2016 outlook on 2/10/16. For the year ended December 31, 2015, MHGU generated $210 million revenue and $7.0 million net income (around $0.93 per diluted share), 31% and 155% more than 2014, respectively.  The company also gave 2016 revenue guidance of 5% to 10% growth or $220.5 to $231.0 million.  We estimate average guidance should translate to 2016 EPS of around $1.05.  On 2/23/16, the company announced a definitive agreement to acquire 19 casual dining restaurants located in the Midwest and Mid-Atlantic states.  No details were disclosed on the purchase price or financing structure of the agreement.  Management plans to update the 2016 outlook at the end of Q2.
  • February 11, 2016 — Determine Inc. (NASDAQ:DTRM)Reported fiscal Q3 2016 non-GAAP revenue of $7.2 million vs. $6.3 million in the prior year and in line with analyst estimates. The non-GAAP net loss of $0.14 vs. $.27 in the prior year and better than analyst estimated loss of $0.19. While the results represented progress it was not as much as we expected.  The drag of DTRM’s legacy business continues to weigh on overall results.  As the company transitions to its new suite of products and customers, it is losing revenue from its legacy business, resulting in muted net revenue growth.  We expect several more quarters of sluggish growth as legacy revenues fall away. Renewed growth is expected during the latter part of calendar 2016.

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