DAC Technologies Selling At Bargain Prices
Sales breakdown per category in percentage for the quarters ending September 30, 2009 and September 30, 2008. It’s obvious from the graph above there’s been a big shift in sales from low margin to high margin products.
The end of the year is a good time to do some bargain shopping. Not only in malls, but also on the stock exchange. Take for instance, DAC Technologies (DAAT – $0.80) which is currently trading at 5 or 6 times fiscal year 2009 earnings. The Company’s net income for the first nine months of 2009 is higher than the net income of the entire fiscal year 2008 and the current fourth quarter is expected to be a terrific one as well.
We believe DAC Technologies’ shares can significantly appreciate in the course of 2010 because:
- During the first nine months of 2009, DAC Technologies showed significant earnings growth for which there are two contributors. First of all, there was a major decrease in commodity prices compared with 2008, and secondly, sales for the Company’s high margin gun cleaning and maintenance and gun safety products increased 31% compared with last year. As a result, gross margins in the first nine months increased from 25% in 2008 to 30% in 2009.
- DAC sells its gun cleaning kits and accessories to Wal-Mart under the famous Winchester brand name. The Company is currently looking to expand its offerings under the Winchester name in both Wal-Mart and other retailers in 2010.
- DAC Technologies has a clean balance sheet as it has a current ratio of 2.62, a book value of $0.93, shareholder equity of $5.3 million and NO long term debt.
- Early September of 2009, the Company received its largest purchase order in its 16 year history. The purchase order from Wal-Mart is for a deluxe gun cleaning kit and is well in excess of seven figures. The order was completely shipped in October and is in stores at present time.
As we are confident in DAC Technologies’ long term future, we reiterate our buy recommendation with a 12-month price target of $1.69, which is more than double today’s stock price.
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