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

Analyzing Penny Stocks

Is Superclick (SPCK) Really an Unsung (& Surprising) Value?
Superclick, Inc. is on the verge of reaching its critical mass.
By James E. Brumley
Published: September 2, 2011 9:02:45 AM PDT
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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.

James E. Brumley is a paid contributor of the SmallCap Network. James
E. Brumley's personal holdings should be disclosed above. You can also
view SmallCap Network's complete disclaimer and disclosure.