Monday, April 11, 2011

ANOTHER LOOK AT CREDITRISKMONITOR.COM

CreditRiskMonitor.com (CRMZ) has been overlooked and ignored. 30% of the Fortune 500 are among the company's world wide subscribers! It is rapidly growing, profitable, has material free cash flow and has explosive growth potential beyond what it has already experienced.

CRMZ has 7.9 million shares outstanding. The shares do not trade every day and average daily trading volume in last six months averaged only 700 shares. In the fullness of time the company and its stock is not going to attract less attention, it is going to attract more attention. So larger trading volume and greater liquidity will come about in time.
Stories abound in the press today about the funding valuations of companies by venture capitalists. Thus it seems appropriate to take note of CreditRiskMonitor.com which at the present price of $6.00 per share, given its 7.9 million outstanding shares, has a total current market value of $47.4 million.

CreditRiskMonitor.com is a digitized database company.
The overall focus of the Company's totally digital services is on facilitating the extension of commercial trade credit from one business to another via its internet website 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 pass 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, tm scores, credit limit recommendations, company background information, plus Moody's Investors Service ("Moody's") and Standard & Poor's ("S&P") ratings and much more. 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 FRISK® score reports, credit limit alerts, financial statement updates, SEC filings, Moody's and S&P rating changes, credit-relevant news stories and press releases. The company is also building its database on private companies which augers well for expanding its trade credit data services in the years ahead.

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

Please take a peek at a sample of its reports, this one on CRMZ itself, and note the detailed CRMZ financials of its past 5 year extraordinary record at http://crmz.com/Report/Snapshot.asp?BusinessId=2274

CreditRiskMonitor’shas 7.9 million shares outstanding, free cash flow in 2010 was approximately $2.5 million helped in part because it does not pay taxes as a result of a tax loss carry forward. It reports earnings on an after tax basis however. The company has been profitable and cash flow positive for over 5 yrs and has over $6.8 million of cash and equivalents and no debt whatever. Its shareholder equity in 2009 was $3.4 million and in 2010 about $4.1 million for average equity of about $3.75 million. The goodwill on the balance sheet for both years was nearly $2 million which means average tangible shareholders’ equity for 2010/2009 was about $1.75 million. Free cash flow generated in 2010 of $2.5 million divided by average shareholders’ equity of $3.75 million works out to 68% and an astonishing 143% 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 $6.8 million of cash/cash equivalents. The company's cash we would note dwarfs shareholders equity; cash on hand at Dec 31, 2010 equaled 162% of total equity. The year-end cash position also amounted to 73% of 2010 net sales.

However, there is much, much more to the rationale for investment in CRMZ than the numbers, the growth, the profitability and the financial strength.

• We are in a world-wide debt and credit crisis. In the U S total credit market debt as a percentage of GDP now stands at 355% -- down from 375% a few years ago -- but compares with 260% at the peak in the Depression nineteen thirties. One should therefore want to have some investments involved with the very important service of providing credit information and possess the characteristics of contra-cyclicality and recurring subscription revenue streams, critical variables for today’s challenging economic times.

• The company is an internet B2B company that came through the recent contraction with increasing revenue, and profitability.

• Dun & Bradstreet owns the major market share -- perhaps with a penetration of 80% -- of the credit reporting business. It has almost a $billion in debt, negative net worth of $646 million, and yet (given strong cash flow) pays dividends of $70 million and annually repurchases stock. So they do have financial and operating profit restraints on their ability to lower their prices. It would be akin to shooting themselves in the foot for them to reduce their prices down to CRMZ's service price level from the high they charge the likes of Fortune 500 companies and others.

• Given the above CRMZ makes no effort to displace D&B but does clearly entice customers to reduce their level of usage of DNB services on which it bases its charges and instead use CRMZ which not only has a flat annual fee for "all you can eat" and as often as you choose to "eat" but has a charge which in many cases might be a very small fraction of what the customer pays D&B.

Extraordinary returns in public companies are made by being early investors in small companies with great business characteristics. CRMZ has gained a good foothold in the credit information business and there are many reasons and avenues for its financials to continue to grow. For example only about 30% of the Fortune 500 are among the company’s world wide subscribers. Thus CRMZ appears to us as an excellent long term investment, and a particularly valuable one when compared to other data base companies and to VC backed internet startup and established companies so in vogue these days such as Facebook, Twitter, and others that seem to be exciting so many folks.
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Overlooked Or Ignored By Otherwise Intelligent Investors® is a registered trademark of Santa Monica Partners, L.P.
Santa Monica Partners owns CRMZ shares

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