About GlobalSCAPE

GlobalSCAPE, a provider of Global Managed File Transfer (MFT) solutions and wide-area file services (WAFS) technologies, delivers a modular approach to solving the enterprise challenges of security, bandwidth, latency and regulatory compliance. GlobalSCAPE’s products securely and efficiently move files such as financial data, medical records, customer files, intellectual property, and other sensitive documents of any size between supply chain partners and branch offices. GlobalSCAPE’s products are used by mid-sized and large enterprise companies, including virtually all of the Fortune 100, leading technology, banking, healthcare, and public sector organizations. Headquartered in San Antonio, TX. GlobalSCAPE is also the developer of CuteFTP, the most popular file transfer protocol application on the market. For more information on our risk-free purchase options, visit www.globalscape.com or call 800-290-5054 (US) or 210-308-8267 (international).

Thanks to Ket for bringing this stock to my attention a couple weeks or so ago<applauds>. It looked fairly extended at the time so i was hesitant to buy but now after some consolidation and todays breakout it appears we could see a continuation of this bull run.

Fundamental Analysis:

GSCP has experienced a large amount of growth from 04 - 06 with an 800% increase in net income over the course of those 2 years. Which explains why its share price has increased from a slim .15 cents/share in early 2005 to todays close of 4.19, equating to a staggering 2700% gain. Currently GSCP is trading at a 37.08x earnings multiple compared to the software programming industry average of 27.5x making its current valuation extended. Though given a low foward P/E of just 12.32x, less than 1/2 the industry average, investors and traders aren’t hesitant to continue to drive price action in favor of the bulls.

For the current year 07′ GSCP is expected to report revenues of 20.34m on .3 eps, which entails an 85% increase in revs and 87% increase in eps from the prior year 06′. As we head into 2008′ the high growth story is expected to slow to down to around 16% annual change. Though given the future growth into 07′ and 08′, and GSPC currently just a small company at $72m cap, I think price will continue to trend up especially given the current technical setup. As GSPC expects to report eps of .34 in 2008 we could hypothetically say that GSPC should be trading around $8 - $9/share in the coming months to be fairly valued in the software programming industry. As the industry average P/E is currently trading around 27x earnings and GSPC is expecting .34eps in 2008, .34 x 27 = GSPC should be trading around 9.18/share in the future to be failry valued in software programming industry.

Being that sofware companies usually have very high margins. Their ability to maximize income as revenue increases is staggering. In 2006 GSPC had a profit margin of 95% while their net margin was just 17%. But as revenues increase dramatically(85%), their profit margins will likely remain similar, while net inc margins increase significantly. This is because SGA and RD aren’t increasing nearly as much as revenues. Which in turn the increased revenues go strait to income. Which is why earnings for 07′ are increasing 87% when revenues increased 85%. As revenues grow in the future, the majority of the increase in revs will go strait into net income.

Recent Headlines of significance:

-Synteras Partners with GlobalSCAPE to Provide Secure Data Management Solutions to Enterprise and Government Customers
“The partnership with GlobalSCAPE increases our ability to offer our government and commercial clients a proven and scalable solution to assure individual and enterprise information is secured, safe and retrievable on a 24/7 basis,” stated Brad Fugitt, President of Synteras. “In addition, our partnership will allow clients the ability to hire one team to address the challenges of compliance with HSPD-20 and similar government and Federal mandates.”

-GlobalSCAPE Boosts Security, Workflow Integration, and Administrative Capabilities with Introduction of Enhanced File Transfer Server 5.0

-GlobalSCAPE Announces $3,000,000 Stock Buyback

Technical Analysis:

Looking at the 3 year weekly chart GSPC looks extremely bullish as price first broke out of its descending wedge pattern on heavy volume. Since then it has consolidated and now has broken out to its all time high close as we are in midweek.

Looking at the shorter term chart GSPC has had a huge momentum run from a low near $2/share to over $4/share as of todays closing price. Price formed a small symmetrical triangle pattern which had an upside breakout today on above average volume confirmation suggesting a continuation north. Currently price is down to around 4.12 AH, i would like to pick up some shares near the midpoint of todays candle and breakout point around $4/share.

Over all this looks like a great stock to speculate on as its technical setup looking at the longer term weekly chart is extremely bullish. I’m Looking to Buy GSCP tomorrow.

-fous

This entry was posted on Thursday, July 12th, 2007 at 1:54 am and is filed under Small Cap Stock Picks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.