Rf Industries (NASDAQ:RFIL) ($9.50) – RFIL designs, manufactures, and/or sells communications equipment primarily to the radio and other professional communications related industries in both the United States and internationally.

We first disclosed our long position in RFIL on 3/18/2013 at a price of $6.37 when we alerted premium members of our bullish article “Is Rf Industries’ (RFIL) Increased Dividend Payout a Clue to Consistent Growth?”  We then added the stock to our GeoBargain list on 4/10/2013 at $6.46, however we are now removing RFIL from the list at the price of $9.50, or 47% higher than when it was added.  The stock reached a 52-week high of $10.86, or 68% higher from our initial coding.

While RFIL has surpassed our near-term price target mentioned in our article of $8.75, it has not yet reached our higher end price target of $13.00.  We do believe the industry that RFIL serves is a hot industry one.  However, our reasons for removing RFIL at this time are due to:

  • Uncertainties we have with the company achieving above average growth due to tough quarterly EPS comparisons that the company will face in the coming quarters.  Recall, one of the criteria we look for in our GeoBargains is EPS growth of around 25% in a  year  of  year quarter-over-quarter comparisons.
  • More importantly,  RFIL has disclosed that a legal issue in its last two 10-Q’s could lead investors to question the integrity of management once  the issues becomes more  apparent.

“On May 24, 2013, a former employee of the Company filed a complaint with the San Diego, California office of the U.S. Department of Labor-OSHA alleging retaliatory employment practices in violation of the whistleblower provisions of the Sarbanes-Oxley Act. The complaint alleges that the former employee was terminated in November 2012 in retaliation for making disclosures relating to fraudulent accounting practices and lack of compliance with U.S. GAAP; violations of multiple Securities and Exchange Commission rules and regulations; and fraud against the shareholders. The complaint does not seek any specified amount of damages, but does seek various forms of relief, including the following: Reinstatement of the former employee’s employment, or in the alternative, an award for lost future wages, benefits and pension; back pay and bonuses; compensatory monetary damages in an amount to be determined; reasonable attorney’s fees; and all costs of litigation. The Company disputes the retaliation claim and has notified its employment practices liability insurance carrier of the demand.”

We will keep a close eye on the story to see if any new growth catalyst emerges that may give us a more insight into RFIL’s future.