Capstone Companies Inc (CAPC)

[PennyMann]

$CAPC Capstone Companies Inc as of 8/7/14

Industry: Electronic Components

IR: [e-mail]

PennyMann overall opinion:
Good long-term hold. 6-month chart has overall uptrending, but a long period between of sideways trading. Fundamentals show improvements and strength for a penny stock. Company has new products and revenue streams planned with improving existing product sales. Investments in a Hong Kong location and marketing will boost global sales.

Florida SOS

Company website

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Company and Product Info

Contents

Search by ( ) reference thought out post. This post is rather lengthy so this table contents will hopefully aid in focused reading.

(AA)Fundamentals
(A1)Status and Share Structure
(A2)10-K 12/31/13
(A3)10-Q 3/31/14
(A4)Product Info
(BB)Technical Analysis
(B1)PennyMann's TA
(B2)Momo indicators
(B3)Barchart
(B4)American Bulls
(B5)PennyMann's Charts
(B6)Msturgeo's TA at iHub 3/28/14
(CC)Technical Analysis
(C1)QuoteMedia
(C2)DDNotesMaker
(C3)Hotstocked
(C4)StockPromoters
(C5)iHub CAPC board
(DD)Recent PRs
(EE)Officer Info
(E1)CEO and President
(E2)Insider Holdings
(FF)CAPC Stock Valuations
(F1)Current EPS and PE
(F2)5/16/14 Revenue Based Valuation: Price/Sales Ratio (PSR)
(F3)Industry Comparisons
(GG)Corporate Communications
(G1)3/28/14 Webcast and Teleconference
(HH)Products and Reviews
(H1)Products
(H2)Product reviews
(II)Shareholder Thoughts
(I1)Townie's thoughts 3/27/14

(AA)Fundamentals:
Ever hear the expression "DD is King"? Fundamental analysis is usually ignored by penny stock day traders but for long-term investors it is critical.

(A1)Status and Share Structure
+ OTC QB
+ SS: 3/31/11 850m a/s; 6/30/13 657.76 o/s; unknown float
OTC Markets SS info
12/31/13 10-K o/s: 657,503,683
Hurricaneman iHub board (see below for details): Insider shares held- 282,757,819; 353,605,858 dilutable
Estimated float: 657,503,683 o/s less 282,757,819 insider shares equals 374,745,864
+ 52 week: .0025 to .0252

(A2)10-K 12/31/13
+ Assets: 11.3m vs 6m 2012; current 8.7m vs 4m 2012
+ Liabilities: 9.4m vs 5m 2012; current 9.4m vs 3m 2012
+ Equity: 1.9m vs 1.1m 2012; Deficit 5.3m vs 6.1m 2012; APIC 7.17m vs 7.13m 2012
+ Revenue: 14.6m vs 8.4m 2012
+ Expense: operating 2.4m vs 2.1m 2012; interest 389k vs 274k 2012
+ Net income: 727k vs (607k) 2012
+ Weighted average shares: 657,503,683 vs 650,724,916 2012
+ Diluted shares: 813,450,206 vs 810,671,493 2012
+ Cash: 437k vs 411k 2012; mainly from notes payable
[url]
http://www.otcmarkets.com/stock/CAPC/filings[/url][tag]SEC filings at OTC Markets[/tag]
At SEC

(A3)10-Q 3/31/14
+ Assets: 7.6m; current 5.1m
+ Liabilities: 5.5m; current 5.5m
+ Equity: 2.1m; Deficit 5.1m; APIC 7.16m
+ Revenue: 4.1m
+ Expense: cost of sales 2.8m; operating 944k; interest 101k
+ Net income: 261k
+ Weighted average shares: 654,010,532; diluted shares: 815,190,442
+ Cash: 452k; mainly from notes payable
http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=9991577" rel="nofollow" target="_blank" >http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=9991577

(A4)Product Info
WHERE TO PURCHASE

Thank you for your interest in buying Capstone products. You can find our products at various retailers, e-tailers and catalog companies nationwide. As the below list is continually updated, we recommend you check back frequently.

2-IN-1 10LED Wall Plate
Costco
HD Supply
Home Depot
Sam’s Club
Walmart
Eco-i-Lite – Multi-function Power Failure Lights
Costco
Energy Federation Incorporated
Lowe’s
Office Depot
Okobojinize
Smarthome
The Container Store
The Home Depot
True Value
PATHWAY LIGHTS® – Booklights, Tasklights and E-reader Lights
Smarthome
Target
Wireless Motion Sensor Lights
Costco
Energy Federation Incorporated
Okobojinize
Pricesmart
Sam’s Club
Smarthome
(From Capstone Industries) NOTE: If you don’t find the product you are looking for on the above list, please email us at [e-mail], and we will respond with the most current information available.
Also note that not all products are available at every retailer or in every listed store or website. Please contact them directly for pricing and availability, as certain models may be available only selectively.

(BB)Technical Analysis (6-month)

Many liken chart analysis, also called technical analysis (TA), to tea leaf reading. Yet, many traders have proven TA to be reliable on the short-term given proper analysis and other factors such as news, filings, and promotions for buying stock are considered.

(B1)PennyMann's TA: 9/10 Buy.
as of 8/7/14

+ Line chart: Overall uptrend since Oct 2013 with flat trading from Dec 2013 to February 2014; next leg up started 3/31/14.
+ 50 MA crossed the 200 MA 10/18 (golden cross); 8 MA crossed the 32 MA 7/22/14.
+ Parabolic SAR (PSAR): 6 days support.
+ Bollinger Bands (BB): PPS is riding in the buy channel; between the 32 and 8 MA.
- Direction Movement Index (DMI) w/ADX: -DI 19 is the trend with ADX signaling a weakening trend at 20 but watching for change.
+ Commodity Channel Index (CCI): Signaling buy at 58; historically a good indicator oversold and overbought.
+ Ichimoku Cloud: Forecasting strong buyer pressure and upward pps.
+ Moving Average Convergence/Divergence (MACD): is above the threshold and signaling buy.
+ Relative Strength Index (RSI): 56; pps has fallen when RSI hits 70.
+ Chaiken Money Flow (CMF): Signaling buyer pressure; has been a good predictor of oversold. 
+ Accumulation/Distribution: Strong accumulation.
+ Money Flow Index (MFI): 59; buy signal; historically not a strong indicator of overbought or oversold.
+ On Balance Volume (OBV): Following Acc/Dist.
+ Rate of Change (ROC): 2% with uptrend. Over 100% is generally insustainable and dips below 0 usually predict pps uptrend. 
+ Volume: Increases at filings or news. Pretty constant outside events. 

(B2)Momo indicators:
+ Volume: Increased since 10/14/13.
+ L2: Mixed interest.
+ iHub board is long interest.
+ Short volume interest: 20-70% past month; fluctuates daily.
http://otcshortreport.com/index.php?index=CAPC&action=view#.UpKkjHi9LCQ
This report represents selling volume. Many posters have discussed buying data could be in this data as well, but is a small amount generally. I use the data as an overall selling barometer and not for short selling only.

(B3)Barchart: 56% Buy; 20s, 75m, and 67l.
Barchart offers many trader resources. Popular TA signals are used to offer a free buy/sell opinion if your poking for quick TA.
Barchart opinion

(B4)American Bulls: 7/15/14 Buy
American Bulls offers free candlestick pattern analysis and signals
American Bulls

(B5)PennyMann's Charts:
Stockcharts.com is my favorite charting resource that offers free and paid content.






(B6)Msturgeo's TA at iHub 3/28/14 post:


(CC)News:
News can greatly sways investor and trader trading sentiments. Here are a few sources of news for CAPC.

(C1)QuoteMedia: Company PRs regarding financial improvement and investment company interest
QuoteMedia CAPC

(C2)DDNotesMaker: Offers user submitted quick DD and ticker buzz clouds for popular DD searches on the site.
DDNotesMaker CAPC

(C3)Hotstocked: No CAPC articles found. Offers a promotions historically database for many penny stock tickers. Articles are written by Hotstocked staff with their opinions on company and ticker performance.
Hotstocked

(C4)StockPromoters: None found.
StockPromoters offers a historical database of penny stock promotional mediums sent.
StockPromoters

(C5)iHub CAPC board: Many trades feel message boards do not influence trader behavior. Nothing could be further from the truth IMO. If the ticker board is popular more trading behavior could be influenced than you think.
iHub iBox Summary:

Capstone Industries is a leader in the development, manufacture and distribution of Power Failure Solutions, and innovator of a variety of Safety and Security products for the North American and Latin American retail and institutional markets.

Charts and financial performance visuals also appear.

(DD)Recent PRs:

[url]
http://www.quotemedia.com/finance/quote/?qm_page=19991&qm_symbol=CAPC[/url][tag]QuoteMedia CAPC PR History[/Tag]

4/2/14 GlobeNewsWire: Capstone expects record first quarter sales (for 2014)

3/27/14 GlobeNewsWire: Capstone reports record revenue in 2013

3/14/14 GlobeNewsWire: Capstone announces 4th quarter results and conference call

3/10/14 Equities.con: A Quick Look at All Marketing Solutions as Box Nears IPO

2/6/14 GlobeNewsWire: Capstone assigned power lighting failure patent

(EE)Officer Info:

(E1)CEO and President

Stewart Wallach replaced Howard Ullman and ever since the company and pps have progressing well.

From Uranium iHub poster:

A bit about STEWART WALLACH, age 62, is the Chief Executive Officer and President of the Company since April 23, 2007, a director of the Company since September 22, 2006, and the founder and Chief Executive Officer and Chairman of the Board of Capstone since September 20, 2006. Mr. Wallach formed and sold Systematic Marketing, Inc., which developed and marketed products to mass markets, to Sagaz Industries, Inc., an automotive parts producer for consumers. He served as president of Sagaz Industries for 10 years before forming Capstone Industries, Inc. 1998, Mr. Wallach co-founded Examsoft Worldwide, Inc., which has developed and delivered software technology solving security challenges of laptop-based examinations for major educational institutions and state bar examiners. From 2002, he, through Systematic Development Inc., has provided executive management services to Gatekeeper Business Solutions to assist in its growth. Gatekeeper Business Solutions is a company providing technology for effective labor management and payroll services software to small and medium-sized businesses. Mr. Wallach has not been involved with Gatekeeper Business Solutions since April 2007. Mr. Wallach currently is a shareholder and director of Systematic Development, Inc. and Examsoft Worldwide, Inc. Stewart Wallach is the Chief Executive Officer and President of the Company and the Chief Executive Officer of Capstone.

(E2)Insider Holdings:
iHub poster hurricaneman:

- STOCK OWNERSHIP
- PERCENTAGE OF STOCK OWNERSHIP
- STOCK OWNERSHIP AFTER CONVERSION OF ALL OPTIONS & WARRANTS PLUS THOSE EXERCISEABLE WITHIN THE NEXT 60 DAYS
- % OF STOCK OWNERSHIP AFTER CONVERSION OF ALL OPTIONS & WARRANTS PLUS THOSE EXERCISEABLE WITHIN THE NEXT 60 DAYS
- VESTED
- EXPIRED
- NOT VESTED

Stewart Wallach, CEO, 350 Jim Moran Blvd, Suite 120, Deerfield Beach, FL 33442 (2)
147,618,822
22.4%
172,116,861
23.5%
24,498,039
0
0

Gerry McClinton, CFO, COO & Director, 350 Jim Moran Blvd, Suite 120, Deerfield Beach, FL 33442 (3)
504,949
0.1%
32,754,949
4.5%
32,250,000
0
0

Laurie Holtz, Director, 350 Jim Moran Blvd, Suite 120, Deerfield Beach, FL 33442 (4)
4,628,300
0.7%
7,128,300
1.0%
2,500,000
0
0

Jeff Postal, Director, 350 Jim Moran Blvd, Suite 120, Deerfield Beach, FL 33442 (5)
128,381,748
19.5%
131,881,748
18.0%
3,500,000
4,000,000
0

Jill Mohler, Secretary, 350 Jim Moran Blvd, Suite 120, Deerfield Beach, FL 33442 (6)
0
0.0%
600,000
0.1%
600,000
0
0

Jeff Guzy, Director,Director, 3130 19th St North, Arlington, VA 22201 (7)
832,000
0.1%
5,332,000
0.7%
4,500,000
0
0

Larry Sloven, Director, 350 Jim Moran Blvd, Suite 120, Deerfield Beach, FL 33442 (8)
792,000
0.1%
3,792,000
0.5%
3,000,000
0
0

ALL OFFICERS & DIRECTORS AS A GROUP
282,757,819
43.0%
353,605,858
48.3%
70,848,039
4,000,000
0

(FF)CAPC Stock Valuations
This section will show current and future projected valuations related to CAPC. Traders like to know what may happen along the way...

[I](F1)Current EPS and PE:
4/7/14:

Here's my calculation of eps and PE using the 12/31/13 10-K earnings figures. Let me know if I messed up a value.

Fool.com stock valuation intro

Fool.com earnings based stock valuation

Earnings per share:

$727k earnings (profit) / 850m a/s = $.0009/share eps

$727k earnings (profit) / 657.76m o/s = $.0011/share eps

PE currently:

$.0236 current pps / $.0009 eps = 26.22 PE

$.0236 current pps / $.0011 eps = 21.45 PE

Most stocks trade at 10-15 PE of eps. So, CAPC is overvalued. We should be trading at $.009-$.0135 pps with PE 10-15 using the a/s in the eps calculation. Based on earnings in the last 10-K.

Future looking PE and eps expected at that PE:

$.10 future pps * 10-15 PE = $1.00-$1.50 eps

$.20 future pps * 10-15 PE = $2.00-$3.00 eps

$.40 future pps * 10-15 PE = $4.00-$6.00 eps

Let me know if you want another stock valuation method as there are a few...

I had discussed projecting out CAPC's eps and PE based on meaningful growth rates but I haven't determined those yet. I'm happy to hear growth rate projections to aid me.

5/16/14:

Earnings per share:

$261k 3/31/14 earnings (profit) + $1.113m 9 months 2013 / 850m a/s = $.0016/share eps

$1,374k earnings (profit) 12 months trailing / 654.05m o/s 3/31/14 = $.002/share eps

PE currently:

$.037 current pps / $.0016 eps = 23 PE

$.037 current pps / $.002 eps = 18.5 PE

Most stocks trade at 10-15 PE of eps. So, CAPC is slightly overvalued. We should be trading at $.016-$.024 pps with PE 10-15 using the a/s in the eps calculation. Based on earnings in the last 10-Q.

Future looking PE and eps expected at that PE:

$.10 future pps * 10-15 PE = $1.00-$1.50 eps

$.20 future pps * 10-15 PE = $2.00-$3.00 eps

$.40 future pps * 10-15 PE = $4.00-$6.00 eps

(F2)5/16/14 Revenue Based Valuation: Price/Sales Ratio (PSR)

654,010,532 o/s 3/31/14 X $.037 5/16/14 pps = $24,198,390 market capitalization.

Conservative valuation would add current long-term debt: $5,474,057 3/31/14 + $24,198,380 = $29,672,446 market capitalization.

$659,794 3/31/13
$14,593,826 2013 less $659,794 = $13,934,032 ending 9 months 2013
$4,088,369 3/31/14 plus =
Total $18,022,401 12 months trailing Revenue

$29,672,446 market capitalization / $18,022,401 12 months trailing Revenue = 1.65 PSR

The lower the PSR the better is the general rule of thumb. Compare PSR with industry competitors.

Revenue valuation stock method Fool.com

(F3)Industry Comparisons

Capstone competitors at Morningstar

Industry averages:
+ PRS 1.7 -> Capstone 2.1 (1.65 calculated 5/16/14)
+ P/B 2.1 -> Capstone 12.9 (want this to be lower than industry to show pps is undervalued)
+ P/E 22.2 -> Capstone 41.3 (21.5 calculated 5/16/14)

(GG)Corporate Communications
Corporate communication besides PR issuance and social media blurbs can aid on further understanding if the company's initiatives, goals, and expected results.

(G1)3/28/14 Webcast and Teleconference:

With: Stewart Wallach, Capstone’s President and Chief Executive Officer, and Gerry McClinton, Chief Financial Officer and Chief Operating Officer.

http://www.sec.gov/Archives/edgar/data/814926/000093980214000027/form8ka032813ex99-2.htm

Highlights
+ Three initiatives
- Deepen our market penetration for our existing power failure lighting solution products
- Expand our product portfolio
- Capitalize on our expertise and innovative and rapid product development, contract manufacturing in Asia and product import and logistics knowhow
+ Feb 2014, assigned power failure technology rights from AC Kinetics
- Will allow lighting fixtures to recover from power failures and for uses to turn on and off as needed as an industry first capability
+ Larry Sloven is leading Capstone International in the fully staffed Hong Kong office
- More revenue and faster product response independent of US operations
+ Capstone is a more scalable organization as a result if the three initiatives and investment
- More products will be introduced in the next 6-9 months than the prior 18 months
- Most major domestic retailers do business with Capstone and the 2014 product roadmap is expanded
+ 12/31/13 stats:
- 74% revenue increase from 2012; $1.3 million invested in marketing efforts would have made gross revenue $15.3 million
- New products contributed $5 million; products base have been diversified
- Non-core products, such is FIFA watches, were sold to increase revenue
- Gross profit doubled vs 2012
- Operating expenses were 17.1% of Sales versus 24.1% in 2012
- $845k invested in the Hong Kong office and branding and $1.25 million in marketing for a $2 million total
- Net profit $727k vs $600k 2012
- $500k invested in AC Kinetics for minority stake
+ The company has no interest in having stock promotions but instead is building a valuable company for long-term investors.
- The CEO feels insider shares have not been sold due to the officers' belief that the company will be greater in the future.
- The 12-month metrics are best to evaluate the company upon, not quarterly metrics
+ Most of the Q&A at the end focused on CAPC stock trading questions, so see the transcript, but here are some specifics:
- The company will not issue fluff PRs and is investing in new initiatives to expand the company and product offerings.
- AC Kinetics shares technology and Capstone has a business relationship; AC Kinetic Officers are but on the Capstone Board yet and it is hoped to share revenue streams in the future
- The company has been in more product buying meetings and is focused on selling products that are received well; reviews take 6 months so growth may not be as fast as expected
- AR increases are due to 2013 4th quarter sale increases, not the 80% customer concentration
- The doubled long-term debt will not be refinanced and is held by insiders $3.2 and Sterling Bank $4.2 million

(HH)Products and Reviews
Products and services are key to revenue generation. Knowing the company's offerings can help decision making fur the future. Gauging consumer confidence can aid in future perspectives prediction.

(H1)Products:

(H2)Product reviews:
SAMs Club
http://www.samsclub.com/sams/5-led-power-failure-light/prod7200247.ip

(II)Shareholder Thoughts

(I1)Townie's (iHub CAPC mod) thoughts 3/27/14:
CAPC is just getting started. The CEO is very happy with Q1 and how it is going. They got the momo, and this will continue into the summer at least. These new products that were due to be shown at the housewares exhibition in May 2013, could be shown earlier as the CEO mentioned in PR today, 3/27/14. These are maybe and I stress maybe, HUGE game changers.

Still time to get in and get 100% return in a couple of months, that's not bad in my books, and comes with little risk. This isn't going down, it's going up.

+ Chart looks great
+ Company Revs are Great
+ Company is profitable.
+ Insiders hold a bundle and they aren't selling

They are looking at a up listing, but I'm unsure when this would happen. They need to get off the OTC imo.

The 3/28/14 webcast should be very interesting, lots of great questions have been sent in with no holds barred.