Anyone still follow QBAK? Prob no rush to buy anything in this market, but I picked up a few shares today. Earnings report yesterday didn't look too hot as they had a brutal comp. But the quarter was actually better than it looked. Revenues fairly strong. And I noticed this in the 10Q:
The gross profit decrease for the three months ended June 30, 2019 compared to the prior year period is primarily attributed to our power supply business, as the Company terminated one of its contract manufacturers and purchased unused raw materials from the manufacturer. The value of those raw materials required a one-time write down of $190,000, which decreased gross profit.
Gross profit also decreased as a result of the Company’s project development service contract with Sony, which arrangement mandates different levels of gross profit during various phases of the project. The current phase allows a gross profit limit of 10% with a maximum profit of $250,000.
Without that 1-time writeoff in the power supply segment, Q2 earnings would have been .09/share. Would have been a decent sequential improvement on the top & bottom lines from Q1, even with the weakness at power supply. Sounds like things should get better in this segment. CEO comment from the Q2 earnings PR:
“We are actively taking steps to address the challenges in the power supply business, including product expansion, and pursuing new strategic partnerships.”
Unlike power supply, the data storage division (which normally accounts for all of the profit) had an excellent quarter. Almost as strong as last year when the stock was in the $8's. Data storage should keep on growing, with possibly a big bump next year when they introduce that optical disk product through their Sony partnership.
QBAK has been buying back their own shares. They bought a chunk of shares in May, some as high as $6. I'm guessing they will continue to buy shares down here at the 52-week low. The lower share count should enhance EPS going forward.
QBAK has a great balance sheet with about $2.30/share in cash. With Q2 earnings of .09/share (minus the 1-time) and $2.30/share in cash, I think the stock is quite attractive below $4.50. This low floater should be good for a bump to at least the $5's in the coming months. Comps will soon get easier and QBAK has the potential to post .20+ quarters. Stock will be a double or triple from here if that happens.
Here's the earnings PR: https://finance.yahoo.com/news/qualstar-reports-fiscal-2019-second-212800573.html