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10/02/2011

3 Stocks: 1 Above and 2 Below Intrinsic Value with insider activity

These are just my estimates and obviously time may prove my thoughts incorrect.Please do the additional work if you decide to invest.


Current Price trading below Intrinsic Value :Possible discount to the fair value

DWCH: Datawatch

195,642 shares purchased by insiders  over the prior 6 months or 7.25% of the float.  2.7 million shares in the float.  Two individual executives were aggressively buying. The CEO and Chairman  of the  board.

Average annual FCF from 2007 to the TTM was $2,015,800. $1,846,000 for the TTM. FCF margins averaged 9.50% for 2007 to the TTM period and 10.66% for the TTM.  I used these results to help build part of my valuations.

So the current FCF and the high probability of a steady but quick increase in FCF based on recent material improvements are likely to impact the true value of the business. Without showing any detail math at this time the DCF may indicate a present value greater than the current price.

Current price  = $5.35

Market Cap:32.96M

Enterprise Value:24.70M

Enterprise Value/Revenue: 1.43

Enterprise Value/EBITDA:13.21


ITI: Iteris, Inc

Current Price trading below Intrinsic Value :Possible discount to the fair value

95,182 shares were purchased over the prior 6 months. Automatic sales reduced the net activity from the more obvious conviction from  purchases by 5% owners . A $3M stock repurchase program was announced in August.

FCF sales margins of 9.38% based on the annual average from 2008. The recent contract wins like the 10 million traveler information services contract and the public sector making commitments to use private sector companies like Iteris to improve infrastructure bodes well for Iteris. Virginia Governor Bob McDonnell made the comment. ..Virginia system includes valuable assets that offer opportunities for private-sector sponsorship, and we intend to take full advantage of that to offset operating costs. The 10 million contract win is one example of the public sector looking to do more with less and Iteris will benefit.

Market Cap: 39.19M
Enterprise Value: 30.26M
Price/Book: 0.73
Enterprise Value/Revenue: 0.51
Enterprise Value/EBITDA 8.72