About NetSol:
TechnologiesNetSol Technologies is a multinational provider of enterprise software and IT services to the financial services industry. NetSol helps clients to identify, evaluate and implement technology solutions to meet their strategic business challenges and maximize their bottom line. By utilizing its worldwide resources, NetSol delivers high-quality, cost-effective equipment and vehicle finance portfolio management solutions. The Company also delivers managed IT services ranging from consulting and application development to systems integration and development outsourcing. NetSol’s commitment to quality is demonstrated by its achievement of both ISO 9001 and SEI (Software Engineering Institute) CMMi (Capability Maturity Model) Level 5 assessment, a distinction shared by only 94 companies worldwide. The Company’s clients include global automakers, financial institutions, technology companies and governmental agencies. Headquartered in Calabasas, CA, NetSol Technologies also has operations and/or offices in London, San Francisco, Adelaide, Beijing, Lahore and Karachi, Pakistan. To learn more about NetSol Technologies, visit the Company’s web site at www.netsoltek.com.
NTWK popped up on my technical analysis filter early last week when they announced a record Q4 in which they swung into a late year profit on 84% revenue growth and EPS of .07. This resulted in price action to jump 36.99% on the day and climbing to as high 70% during the filing days session. During the fiscal year 2007′ NTWK has been in a slump with big losses reporting losses of -.09, -.08, -.27, and -.01 respectively for the last four quarters. With the huge jump in Q4’s earnings to .07 its no surprise to see the huge jump in price action this past week. Which was also on the companies record trading volume, a whole 372% increase in volume over any other week in the companies history since going public in 1998.
Even though NTWK reported record earnings of .07 for Q4 they still had quite an ugly year on a profit basis reporting -.27eps annualized for 2007. But this is all expected to change in 2008 as analysts are expecting a turnaround for the company reporting an estimated .21eps for the full year 2008 giving NTWK a low forward P/E ratio of just 6.75x compared to the Software & Programing industry average of 27.8x (according to etrade) making this small cap $44m company look attractive at these low prices near $2/share. Fair value for the company in its industry is estimated around $5.83/share found by multiplying the 2008 earnings estimates of .21 by the industries P/E average of 27.8. Mean price target by analysts are $4/share which would be around 100% gain from todays price.
Q4 Highlights:
Fiscal Fourth Quarter 2007 Financial Highlights
— Revenues increased 84% year-over-year to $8.6 million
— License fees increased 137% year-over-year to $2.9 million
— Maintenance fees increased 97% year-over-year to $1.5 million
— Services increased 57% year-over-year to $4.2 million
— Gross margin increased to 62% compared to 34% in the prior year period
— Operating income improved to $1.9 million compared to an operating
loss of $1.5 million in the year ago period
— GAAP net income increased to $1.3 million, or $0.07 per share,
versus a loss of ($0.11) in the year ago period
— EBITDA increased to $2.0 million, or $0.10 per basic and diluted share
— Business outlook and revenue generation for fiscal year 2008 remains
strong as NetSol scales up to deliver another solid year of growth.
RECENT HEADLINES:
Technically NTWK is looking very bullish as this recent jump in share price is back by some very powerful volume which suggests the likely hood of a new bullish trend in the making. Looking at the 3 year weekly chart we can see that price broke out of descending wedge pattern and has since had some profit taking. With wedge patterns like this, many a time price will retest the breakout point before a continuation occurs. So we could expect price to possibly retrace near $2/share before a continuation north takes place.
Looking at the shorter term daily chart we can see that there is some horizontal support near $2/share as well making this point look very attractive for an entry opportunity. As well, when large gaps like this occur price usually takes a trip down near the 13ema or 9sma where it then makes a bounce and continues its progress. Currently the 13ema is trending up and sits around 1.90 currently as of friday. So what we have here is some very strong support in the $2 area which would most likely be NTWK’s point of reversal from a technical point of view.
Overall NTWK looks very attractive at its current prices near $2/share and i think this could be an easy 20% + gain in our portfolios. Short term price target i would say near $3 share which would be a 50% gain if we entered near $2. With the current fundamental turnaround spiked by a record quarter, breakout in the longer term chart, record volume in conjunction with a powerful short term move, and the fact i like this stock makes me think that this stock could be a big winner for us.
I’m looking to buy NTWK most likely during Mondays session.
Optimal entry would be near $2/share.
Short term price target: $3/share
