AFP Imaging Corporation (fka IWKS)

[Microcap Speculator]

AFPC coverage at The Microcap Speculator:

AFP Imaging (AFPC.OB) keeps popping up on my trading radar, and I like what I see. AFP makes digital and analog x-ray units and related devices for medical, dental and veterinary offices. AFP has a market cap of roughly $20M and only a small amount of net debt. It had sales last year of approximately $23M, giving it an enterprise value to sales ratio of less than one. Despite these reasonable valuations, AFP is growing. In its latest fiscal year, revenues increased 19% and income from operations increased 14%. David Vozick, the chairman of the board, explained:

This is the highest sales and profit levels for AFP in the past three years. Management is extremely pleased to report that the Company continues to invest in and expand its veterinary and dental imaging products....In addition, we have brought to this new opportunity the integration of our direct digital imaging 'DR' alternative to replace x-ray film and take advantage of electronic storage and communications of clinical images. We look forward to fiscal 2006 with our expanded product lines and geographic coverage.

One caveat: a substantial portion of the company's earnings were based on a tax benefit that occurred when the company charged earnings against deferred losses. By my calculations, the deferred tax benefit will last for another two quarters. After that, the company's tax rate should increase.

The chart looks good, with reasonable support between 1.75-2.00. I can't figure out what caused that spike high in early August around 3.25, but if AFPC remains on track, it should return to that area.

http://themicrocapspeculator.blogspot.com/2005/10/image-of-value.html