Wireless Xcessories Group Inc (WIRX)

[Minding]

To my mind there are a few reasons to be interested in WIRX. First they are moving to list on a major exchange. Second their sales were up hugely in the last report. Third they are in the sweet spot for mobile accessories.

I have some in anticipation of the listing.

Kind regards,
Minding

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Here's what I consider to be the relevant part of an article at Seeking Alpha from late May (http://seekingalpha.com/article/1466611-another-way-to-play-the-boom-in-mobile?source=yahoo)

The Case For Wireless Xcessories

Wireless Xcessories is a cash-rich, profitable nano cap positioned to grow along with the growth in the market for mobile devices. When I first wrote about the company in 2011 ("A Nano Cap Bargain In The Wireless Space"), I mentioned that it had lost money on its operations over the previous three quarters, a loss the company's management had attributed in part to its transition to new business software. I bought the stock then primarily because of its balance sheet: the company's working capital was larger than its market capitalization.

Judging by the company's 4th quarter and annual 2012 results released last month, Wireless Xcessories has swung its operating business to a profit while maintaining a strong balance sheet. Some key numbers from its results follow; for context, note that the company's market capitalization, as of last Friday, was approximately $9 million and its share price was $2.25:

Sales: $12,462,110 in Q4, which represented a year-over-year increase of 94%. For the year, sales were $40,243,548, a year-over-year increase of 80%.
Operating Earnings: $323,453 in Q4, compared to an operating loss of ($14,089) in Q4 of 2011. For the year, operating earnings were $806,095 versus a loss of ($163,657) in 2011.
Net Income: $284,162 or $0.07 per share in Q4, compared to $135,848 or $0.03 per share in Q4 of 2011. For the year, net income was $584,044 or $0.15 per share in 2012, compared to $133,600 or $0.03 per share in 2011.
The most encouraging part of this report for me was the swing in operating earnings, suggesting that the company has found a way to grow its business by profitably selling its products (rather than discounting away its profit margins). The company's CEO, Steve Rade, noted in the release that the company's fourth quarter results were boosted by

[T]he increased sales volume of OtterBox, Incipio, and Trident phone cases, as well as the continued success of our proprietary line, Upwardly Mobile Accessories.

I happen to use an OtterBox case for my iPhone.

Valuation

Based on its closing price as of last Friday ($2.25) and its 2012 earnings, WIRX currently has a trailing Price/Earnings ratio of 15 and a Price/Sales ratio of 0.22. Bear in mind, though, that the company also had $8.1 million in net working capital as of the end of 2012; back that out and the company's operating business is selling for less than $1 million, based on its current market capitalization.

Possible Catalysts

WIRX has climbed nearly 90% since the company released its 2012 numbers late last month, but a few catalysts working in confluence could drive the stock significantly higher. Here are a few possible catalysts:

A relisting of the company's shares. The company voluntarily deregistered its shares in 2008, primarily as a cost savings measure; in its most recent quarterly release, the company's CEO announced Wireless Xcessories would apply to the SEC in the second quarter to relist the company's shares.
The initiation of any commentary/coverage of the company. Right now, there is a dearth of any sort of commentary about the stock. Searching Seeking Alpha just now, the only post I found on WIRX was the one I wrote in 2011; that was the case as well when I looked at the Investors Hub message board for the stock. That suggests to me that the stock's recent climb since its earnings may be mainly due to current shareholders accumulating more shares. The stock may have more room to run if new investors investigate it and find it a compelling value.
A strong Q1. If the company's earnings strength continues into the first quarter of this year, it may encourage new investors to investigate the company and existing investors may be willing to pay a higher multiple for new shares.
Risk Factors

Because WIRX has an extremely small float, those considering investing should note that the stock has the potential to be very volatile. And although the volume has increased slightly recently, in the past the stock has been extremely illiquid. Of course, whenever you invest in stocks, you also have to be concerned about the business risks the companies face. That's true with nano caps as well, but you are also faced with some additional risks. One is that earnings for small companies can be lumpier than those for larger companies. Another is that share prices can languish at prices well below even book or even liquid asset value (as was the case with WIRX when I first wrote about it in 2011). This disconnect between price and value is far less common among larger stocks, where the market operates more efficiently.