ClickSoftware Technologies Ltd. (CKSW)

ClickSoftware Technologies, Ltd. (CKSW) provides mobile workforce management and service optimization solutions. The company offers service optimization suite. Their ClickSchedule enables companies to automate and optimize their service resources; ClickFix, a diagnostic and trouble-shooting tool; ClickAnalyze, ClickPlan, ClickRoster, and ClickForecast that enable corporate decision makers to analyze past performance, monitor current performance, and plan for future service needs; ClickMobile, a wireless workforce management product for monitoring field workforce activities and reducing the labor of dispatching personnel; and ClickLocate that captures the location information of a field service engineer and/or his or her vehicle, and integrates it with ClickSchedule for use in scheduling. ClickSoftware Technologies also offers various consulting services. The company’s products are used by customers in the telecommunications, utilities, financial services, aerospace, defense, semi-conductor, and home service industries. It is headquartered in Israel.

Sector: Technology
Sub-sector: Application Software

Current Price: $5.18

POSITIVES…

Return on Equity (ROE) = 26.6%
A key perfomance measurement of capital efficiency assesses what investment returns management can earn on a company’s existing capital base. A sustained percentage above 20% is considered above average. ROE of 26% is therefore indication of positive sign.

Return on Asset (ROA)= 6.9%
ROA is a measure of how much profit a company earns for every dollar of its assets. Again this reveals how effective the company management is. Few professional money managers will consider stocks with an ROA of less than 5%. ROA of 6.9% is therefore indication of positive sign.

PEG = 1.6
PEG is a widely used indicator of a stock’s potential value. It is favored by many over the price/earnings ratio because it also accounts for growth.

If the PEG is > 1, it indicates that the stock is possibly overvalued or that the market expects future EPS growth to be greater than what is currently estimated. Growth stocks typically have a PEG > 1 because investors are willing to pay more for a stock that is expected to grow rapidly. It could also be that the earnings forecasts have been lowered while the stock price remains relatively stable for other reasons.

Price-to-Sales Ratio = 3.8
Investors are always seeking ways to compare the value of stocks. The price-to-sales ratio provides a simple approach: take the company’s market capitalization and divide it by the company’s total sales over the past 12 months. The lower the ratio, the more attractive the investment.

Debt Level = 0
A rising percentage implies greater financial risk, all else being equal. Rising debt without a rise in Return on Equity should raise warning signals of potential cash flow problems. Percentages above 40%-50% should also be considered a warning. CKSW has ZERO debt making it an attractive investment.

Quarterly Revenue Growth = 31%
ClickSoftware Technologies Ltd. recently said it expects revenue growth in 2007 after the business software company reported strong second-quarter earnings. The company raised its revenue guidance to between $41 million and $42 million, compared with $32.4 million last year.

Recent Contracts
Iceland’s largest utility provider has selected ClickSoftware’s services to consolidate management of its workforce, increase field technicians’ productivity, decrease costs, increase quality of service and strengthen customer relationships. Orkuveita Reykjavikur (OR) is deploying ClickSchedule, ClickMobile, ClickLocate and ClickAnalyze to ensure efficient and effective service delivery for more than half of Iceland’s population in the Reykjavik region. Together, ClickSchedule, ClickMobile and ClickLocate establish the foundation for the real time service enterprise, providing continuous real-time optimization of the service delivery process. This minimizes travel time, improves response during emergency situations, maximizes technicians’ productivity and, ultimately, increases revenues. ClickSoftware’s current quarterly revenue growth is 31%. Such contracts is going to boost their revenue furthur.

Potential Buyout
There are rumors that ClickSoftware could be up for sale in the near future. The company’s stock has gained in recent months, and this could not have been solely due to the fact that it has now announced a strong earnings for the last few quarters. Among the companies that are likely to make an offer for ClickSoftware are, naturally, Oracle Corp., the largest player in its field, but also IBM Corp., with which ClickSoftware has been collaborating. One could even think of hardware companies, such as Cisco Systems Inc., which, lately has been buying software companies too. Any potential buyout will cause the stock price to jump sharply.

NEUTRALS…

Market Capital = 146M indicates low cap stock. Lower cap stocks always carry the risk of higher volatility.

Avg Daily Volume = 530K indicates reasonable trading interest. Too much volume is bad, since it doesn’t help stock move anywhere. Too less volume is bad, since the stock price doesn’t show much movement either.

Revenue = 37.5M
indicates low cap stock.

Profit Margin = 8.7% indicates reasonable profit margins.

Price-to-Earnings Ratio (P/E) = 46 indicates a bit pricy stock price.

NEGATIVES…

Earnings Per Share (EPS) = 0.11
Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component of the price-to-earnings valuation ratio. Higher the ratio, more interest it gathers among investors.

Net Income = 3.2M
As a key measure of company profitabilty, a rising net margin assesses management capability to wring out more net income from incremental sales.

Institution Holder = 24%

Higher institutional interest is sometimes bad news for retail investors. The big boys pretty much control the party and retail investors are left helpless. Caution !!

Short Ratio = 0.3
The short-interest ratio is the number of shares sold short divided by average daily volume. This is often called the “days-to-cover ratio” because it tells, given the stock’s average trading volume, how many days it will take short sellers to cover their positions if positive news about the company lifts the price. Lower the ratio, easier it is for the short-sellers to cover their positions. This encourages more investors to take a short position in the stock.

Share Short = 56K and Share Short last month = 6K
A high short-interest stock should be approached for buying with extreme caution but not necessarily avoided at all cost. Short sellers aren’t perfect and have been known to be wrong from time to time. However an increase of 10 times the shares shorted is an area of concern. Caution !!!

Sub-sector Summary
Analyst believe fundamental outlook for the Application Software sub-industry is Neutral. The sub-sector met analyst expectation for 2006. The year 2007 also looks healthy. However future growth will be determined largely by enterprise IT budgets. However since the investment risk involved in the application software sub-industry is less compared to other sectors, it still makes up an attractive investment for prospective investors. It is believed that corporate spending on enterprise/application software as a whole will grow 7-9% in 2007, consistent with trends seen in 2006.

Large buyers of application software are expected to continue to exercise great discipline in their software buying decisions and maintain a keen focus on return on investment and total cost of ownership. In this buyers market, software vendors will face intense competition. Despite that, enterprises will continue to look to software as a way to increase the productivity of their work forces. Over the longer term the rapidly evolving Internet and e-commerce are creating strong demand for software applications that take advantage of these platforms. Many vendors are integrating web features into their products, and exploring new ways to deliver more value to their customers by assuming more of the risk associated with a typical investment in software.

Year to date, the Application Software sub-industry index rose 9.9%, above the 8.6% gain for the S&P 1500.

Conclusion: ClickSoftware has been able to grow revenues from $24.1M to $32.4M from 2005 to 2006. Most impressively, the company has been able to reduce the percentage of sales devoted to selling, general and administrative costs from 55.10% to 43.59%. This was a driver that led to a bottom line growth from a loss of $2.0M to a gain of $2.1M. ClickSoftware has no debt in its capital structure and may have less financial risk than the industry. In 2006, ClickSoftware increased its cash reserves by 27.88%, or $2.9M which is above the Software industry median.

All in all, Big YES to ClickSoftware (CKSW).

(Source: Yahoo Finance, Investopedia)

  • A simple and effective style of analyzing stocks. Great article!

  • Hi,

    Today I have visited your blog and found some quality information. I think you have maintained a great blog. That’s why we would like to exchange links with your blog.

    My blog is : http://financemedia.wordpress.com/

    Please send me your link info.

    Waiting for your reply.

    With Best Regards,
    charls

    Disclaimer: This email is strictly confidential and is requested not to share with anyone.