Trakm8 revving up?

In September 2011, I mentioned that I had purchased shares in an outfit called Trakm8.

It's a real tiddler, but I think it has excellent potential.

For almost a year the share price changed very little, and hovered around a mid-price of about 13p. However, recently there have been signs of life, and Friday's mid closing price is 19.5p.

In my opinion this is a great little company. Growth in revenues over the past two years have been 22% and 25% respectively, and in a recent trading statement, it appears that the first few weeks of the new financial year have been encouraging and growth has continued.

The company is profitable, cashflow positive, has a robust balance sheet, healthy margins, and a high percentage of it's revenues are recurring.

Since issuing their results in July, they have announced a major contract award with Motorola Solutions. They have released technology updates and a product launch ("eco^N can enable the vehicle operator to reduce fleet fuel consumption by up to 20%. This product has already undergone extensive fleet trials and the savings have been proven." - sounds like a winner with today's sky high fuel prices). The Directors' have made share purchases to the tune of £140,000 (4.2% of the company) at a 21% premium (17p) to the prevailing offer price at the time. Finally they bought back  2% of the issued share capital.

At today's price the company is still only valued at about £3.7m, shares are thinly traded and illiquid, but with a medium to long term horizon I have high hopes and am very encouraged by all of the noises coming out of the company.

I like the management who draw relatively modest salaries but have a lot of 'skin in the game'.

As with all growth companies it's the potential future earnings to keep an eye on, and it's probably not worth guessing this year's EPS figure. However, if they continue with their  double digit revenue growth then it's not too difficult to see them earning between £500,000 and £1m profit in the not too distant future which equates to EPS of between 2.6p-5.2p. Apply a modest 12 times earnings and the share price would be between 31p-62p (although proven growth companies often trade on a far higher multiple).

It is a company at an early stage of development and all the usual caveats apply, but so far so good!