Discussion and Post on Yahoo Message. The question was asked:
"how does a company with revenues AND profits trade so low?"
My Response:
Well you've come upon the $50 dollar or maybe $50 thousand dollar question. I know quite a number of the shareholders of DRG. We've all been asking that same question for the last 6 months and as the company has been making good progress in carrying out its business plan, the share price is really a canundrum (sp?). A number of us have just been increasing our ownership percentages.
Listen to what CEO Melissa Rice commenting on the question you raise (here is an excerpt from the Q1 Conference Call):
"I believe it is time for DRG to get ready for all the growth it is encountering and to start the process of investigating a new trading index. While the share price IS nowhere near it's true value, we believe business fundementals are a great building block in achieving our proper valuation. We believe it is just a matter of time before we do so."
"We think that we have one of the most under valued stocks in the market place and we are doing everything possible to get the word out, because there is no way our market valuation is accurate. At $2.8 million average [at pps of 3 cents] when we do that in revenue every three weeks, and we are profitable and cash flow positive, there is no person that would argue we have proper market valuation. We are committed to bringing our stock price commensuate to our the valuation we believe our sales dictate.
"We believe that not only is there going to be a big....ah, and we have added.....that is one of the reasons we have diversified our core business to include Medico. We believe that not only is it going to be key revenue generator for us, but the market will respond favorably, helping us increase our market valuation."
DRG maintains they can carry out their growth and expansion with their growing cash flow and profits---so they don't need to reach out to the capital markets to raise funds. SO BUSINES-WISE THE STOCK PRICE DOESN'T REALLY MATTER FOR NOW. At some point it might..for uplisting...for future acquisitions, etc. But not now. They've been cash flow positive for the last three quarters....and profitable for the last one.
I don't see much that will stop them from growing and succeeding. I think a number of their products are at least moderately recession proof.
I know this quote of Peter Lynch has been bantered about before...but I believe it really applies to DRG.
"Rule 5: Often, there is no correlation between the success of a company's operations and the success of its stock over a few months or even a few years. In the long-term, there is a 100% correlation between the success of the company and the success of its stock. This disparity is the key to making money; it pays to be patient, and to own successful companies."
What we as investors have to conclude is whether or not DRG is developing into a successful company. Will DRG be around next year, the year after, five years down the road? Depending how we as investors answer these questions will in the end drive the valuation of the stock price. In the longer term, 100% of the time, the stock price and the company's success are inseparably tied.
Is it worth a $1000 or $5000 investment? $20,000? Each of our comfort levels will be different and will be influenced by our understanding and perception of the company's performance.
DISCLOSURE: I own between 1 and 2 percent of the company. I'm not investing here to flip out in the short term. I believe in the company's long term success and plan to be around to witness and profit from it. Right now I don't believe there's a better place for my investment capitol.
You should do your own DD. I'm not advising you.
Randy
Sentiment : Strong Buy
