SRTS developments have been interesting
I think the risk/reward looks good here, but it’s been a weird year for them.
They did that ridiculous inventory build all year insisting the business was coming, but it didn’t. They probably have a good year of inventory on the books right now. At the same time management did a meaningful chunk of buying around 3. They were sellers at higher prices. If nothing else they seem to be good traders of their own stock.
Now at least for this quarter it looks like the business showed up as they said it would. Still they blew a lot of trust previously, and one quarter does not a trend make especially one that tends to be seasonally stronger.
That said they already have cash of 1.25 a share, trading modestly above book value with no debt, and a big quarter preannounced. Their previously alarming receivables are down to merely a little concerning so some of the business trends are pointing up. They also have a history of excessive optimism.
There is reason for it to run into the next report given the pre announcement. The earnings announcement gets tricky. If they come out with bullish commentary given the current share price and numbers on the book I could easily see it doubling from here or more. It was double digits when they had their last string of good quarters. On the other hand if they aren’t enthusiastic it seems fairly priced.
Trading it is a conundrum because I think a big earnings quarter with a bunch of rosy commentary fits these guys. On the other hand I don’t trust them and will have an itchy trigger finger to get out.
At least it trades OK volume so it’s not like getting in and out of something trading 800 shares a day.
