Value Microcaps Motherboard

[southacresdave]

DYNT..$1.04..strong future potential w/140K new business customers.

--The stock just hit a 52 week high today at $1.10. (on Nasdaq CM)
--13.4M shares outstanding, 8.67 float
--Insiders own 35%. Little institutional ownership
--Company is profitable. Fully taxed. Revenues flat the last several years but may change dramatically here soon.
--Small insider buys recently.
--Company started a $1M buyback in February (and actually has purchased shares) to get them back to Nasdaq compliant (above $1) and also because CEO thinks stock is very undervalued for future with new business on horizon. They are borrowing money against their line of credit to do so.
--Low debt (Long term debt is $2.5M. Primarily mortgage on offices building in Utah and plant in Tennessee). (Line of credit debt is $2.4M and decreasing---lowest level, according to latest 10Q, since 2007)
--Salaries (including bonuses) are reasonable at around $200K for CEO and VP, $100K for CFO on a $32M/year business.

Why buy??

The company manufacturers around 70 products at their Tennessee plant (and sells hundreds more) for the physical medicine and aesthetics industry (ex. physical therapists, chiropractors, dermatologist, rehab...) For years they just putted along---didn't even have a comprehensive catalog. Last year they started to get aggressive and created an e-commerce website to bring all their products together (within 90 days over 20% of their business came from it). After that they went after signing GPO's (Group Purchasing Organizations) which they had failed at in the past. These are the major buying groups in the industry. There are 6 total in the industry and they were able to sign contracts with 3 of them!! (starting March 1rst, 2011). These organizations will allow DYNT to serve their 140,000 business members that DYNT did not have access to before (one of the requirements is an e-commerce site to accommodate easy ordering for their members). CEO is very excited that this is the game changer for the company.

DYNT's administrative costs have been very consistent the last few years. An increase in revenue could potentially allow the bottom line to grow rather quickly (especially for a stock with just 13.4M shares outstanding (or less as buyback continues).

Can DYNT get the business?? From their latest 10Q: "one of our primary competitors, closed its Chattanooga Group operations in the quarter ended July 3, 2010.....This essentially eliminated Empi as a significant catalog competitor and further reduced competition in our market. "

Also.... "These consolidations combined with other consolidations and continuing declines in the number of independent distributors have significantly narrowed distribution channels in our market. At the present time, we believe that there remain only two companies with a national direct sales force selling proprietary and distributed products: Dynatronics and Patterson Medical. All other distribution in our market is directed through catalog companies with no direct sales force, or through independent local dealers. However, the network of local independent dealers is rapidly diminishing due to consolidation efforts and increased competition from Dynatronics, Sammons Preston and catalog companies. In the past year, we have reinforced our direct sales team to include over 50 direct sales employees and independent sales representatives. In addition to these direct sales representatives, we continue to enjoy a strong relationship with scores of local dealers. We believe we have the best trained and most knowledgeable sales force in the industry. The recent changes within our market provide a unique opportunity for us to grow market share in the coming years through recruitment of high-quality sales representatives and dealers."

Bullish comments by CEO in latest pr: http://finance.yahoo.com/news/Dynatronics-Signs-Third-GPO-prnews-3859342293.html?x=0&.v=1

CEO letter to shareholders in 2010 http://www.dynatronics.com/CompanyInfo/LettertoShareholders/tabid/139/Default.aspx


I haven't posted in a long time but thought I'd share.

Dave