Is Superclick (SPCK) Really an Unsung (& Surprising) Value?

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• SPCK

  $0.24 +$0.01 +2.17%

Superclick, Inc. (OTC: SPCK) is hardly a household name, though it probably should be. It's that one out of every several hundred bulletin board-listed OTC stocks that is not only profitable, but has been profitable for quite some time. More than that though, SPCK is one of the few small cap stocks that's rising right now, reflective of consistent earnings growth.

Superclick describes itself as "a leading global HSIA solution provider of IP network design, deployment and infrastructure management for the hospitality, healthcare and MDU markets." Now, about three people in the world can translate that, so here's what SPCK does, in English - it provides the broadband service used by guests at hotels.

The 'leading' part of its description of itself may be a little over the top; SPCK is a $10.6 million company, and did $9.1 million in revenue last year. It's not a question of size to potential or current Superclick, Inc. owners though. It's a matter of relative opportunity. And on a relative basis, the stock price still doesn't do the company justice... though that's gradually changing.

First and foremost, the business model works. Revenues have increased every year since 2006 ($3.5 million), reaching $9.1 million last year. The company was profitable by 2007, and though earnings have fallen back from a peak of $1.6 million in 2008 to only $800K in 2010, the current trajectory is one of growth again. Over the past four quarters, Superclick has generated $10.4 million in revenue, and cleared $1.2 million in profit. SPCK has also confirmed 2011's sales will indeed come in somewhere between $10.5 million and $11 million. That should put the bottom line somewhere in the $1.3 million to $1.4 million range.

That translates into a P/S ratio of about 1.0, versus the norm of 2.5, and a P/E ratio of 7.8, versus the norm of about 12.0. And just to be clear, the numbers behind those valuation measures are not only legitimate, but have been consistent.

So why hasn't SPCK been a red hot bullish rocket? Good question. A lot of it may have to do with size.... even the best of $10 million companies can't attract a lot of attention, and institutional investors and big players can't touch it because they can't own enough of it to matter [no single entity is allowed to own too much of a publicly-traded company]. Don't be fooled though - the Superclick, Inc. buyers are indeed starting to come out of the woodwork. The stock's been in a bullish mode since the end of last year, and has pretty much shrugged off the broad market's major problems. How'd it manage that? Because the best of the best always eventually do, no matter how small.

It's been suggested that Superclick is an acquisition target, which doesn't seem hard to believe. Anyone could buy the whole company for what's a drop in the bucket for a corporation, and the fact that it's been profitable for some time negates any real risk. And if that happens, so be it - SPCK shareholders will be rewarded with what's likely to be a 30% premium at the time (the typical acquisition offer).

On the flipside, given the strength and proven viability of the business model, this may be a case where the bigger - albeit longer-term - money is made by being a long-term owner of a stock that doesn't get bought out. With each hotel it adds to its client list, the next client is just that much easier to add. Superclick looks like it's ready to hit its critical mass in that respect. It's just now cultivating business in the Middle East, and won a 54-property contract back in April, most of which hasn't even started to generate revenue yet.

Bottom line? SPCK may well be one of the market's best-kept small cap secrets.