Friday, March 11, 2011

CreditriskMonitor.com vs. a Venture Capital Company

Stories abound in the press today about the funding valuations of companies by venture capitalists. Thus it seems appropriate to take note of CreditRiskMonitor’s (CRMZ) which at the present bid of $3.50 given its about 8 million shares has a total market value of about $28 million. Note too that the company is an internet B2B company that came through the recent contraction with increasing revenue, and profitability, because it has some contra-cyclicality and recurring revenue streams.

CreditRiskMonitor.com is a digitized database company. The overall focus of the Company's totally digital services is on facilitating the extension of trade credit from one business to another at http://www.crmz.com/ accessed through annual subscription licenses. CRMZ provides licensed subscribers paying an annual low fee of $4,000 or $8,000, depending on domestic or worldwide coverage, and additional "passes" at $800 or $1,500 per provides public and proprietary information, designed to save time for corporate credit professionals.

CRMZ may be considered in competition with Dun & Bradstreet but encourages clients to take CRMZ's service in addition to DNB, which most do because of CRMZs considerable added value. The Company publishes comprehensive commercial credit reports covering public companies worldwide, including detailed financial statements, ratio analysis and trend reports, peer analyses, Altman Z" default scores, FRISKtm scores, credit limit recommendations, company background information, plus Moody's Investors Service ("Moody's") and Standard & Poor's ("S&P") ratings. The service also includes trade payment data and public filings (i.e., suits, liens, judgments and bankruptcy information) on millions of U.S. companies. In addition, the service provides continuous filtered news monitoring that keeps subscribers up to date on events affecting the creditworthiness of companies, including FRISKtm score reports, credit limit alerts, financial statement updates, SEC filings, Moody's and S&P rating changes, credit-relevant news stories and press releases.

CRMZ is rapidly growing publicly traded company which unlike VC funded companies needs no cash. Moreover, CRMZ is also growing revenues rapidly yet unlike VC backed companies has growing net profits as well and for some years now. Like VC funded companies CRMZ also has explosive growth potential beyond what it has already experienced.

CreditRiskMonitor’s free cash flow in 2010 is approximately $1.8 million helped in part because it does not pay taxes as a result of a tax loss carry forward. The company has been profitable and cash flow positive for over 5 yrs and has approximately $6.85 million of cash/cash equivalents and no debt. Its shareholder equity in 2009 was $3.4 million and in 2010 about $4.1 million for average equity invested of about $3.7 million. The goodwill on the balance sheet for both years is nearly $2 million which means average tangible shareholders equity for 2010/2009 is about $1.7 million. Free cash generated in 2010 of $1.8 million divided by average shareholders’ equity of $3.4 million works out to about 50% and slightly over 100% return on average tangible shareholders equity. These wonderful numbers are even more impressive since CRMZ has no debt, and presently receives a very low return on the $6.85 million of cash/cash equivalents. The company's cash dwarfs shareholders equity.

CRMZ appears a good long term investment for the very patient investor; particularly when compared to VC backed internet startup companies so in vogue these days such as Facebook, Twitter, and the many others that seem to be exciting so many major investment houses and their big clientele and so many plain folk.

No comments:

Post a Comment