DAC Technologies: Pull-Back Is Buy Opportunity
DAC Technologies (DAAT – $0.79) announced third quarter results for the period ending September 30, 2009, on Monday. Revenues for the third quarter were down 21% compared with the third quarter in 2008 because the Company stopped selling low margin products and concentrated on higher margin items. That was reflected in the earnings which were only down 12% compared to the same period last year.
Total sales for the nine months period were up 4% compared with the first nine months of 2008 to $9,774,700 and net income reached $386,240, or up 189% compared with the same period last year.
In response to these results, the stock dropped about 15 percent. We believe this was an overreaction, especially if you take look at the Company’s outlook.
Just to make sure, we organized an audio interview with the Company’s president and CEO, Mr. David Collins, to give us a more in depth look into DAC’s current condition and future plans.
In the interview, Mr. Collins stated that it was still too early in the fourth quarter to tell what revenues and earnings the Company will realize in fiscal year 2009. He did feel comfortable with his initial guidance of 2009 earnings between 12 and 14 cents per share. This would represent a 100% increase over 2008’s earnings of 6 cents per share.
Furthermore, Mr. Collins confirmed that the largest purchase order in the Company’s sixteen-year history was completely shipped and is in stores at the present time. The Wal-Mart purchase order was for the Company’s deluxe gun cleaning kit and was in excess of seven figures.
Looking at 2010, Mr. Collins said that the Company has picked up seven new products at the world’s second largest sporting goods retailer, and that it is increasing its business and product line with most all other sporting goods retailers. This way, the Company hopes to increase its revenues and gross margins in 2010.
DAC Technologies continues to be very undervalued. Even if the Company’s 2009 earnings come in at the low end of estimates, the stock is trading at a P/E of 6.6! This is very cheap for a profitable business with a clean and solid balance sheet. Buy recommendation.
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