Firstly, I'm pleased to announce that I've linked up with Stockopedia, so a warm welcome to new readers from there. Also just a quick reminder that this is absolutely NOT a share tipping blog, so nothing contained here is ever financial advice. It's just a place for discussion of small caps which interest me. The mantra here is Do Your Own Research! (DYOR).

Tracsis

Shares in Tracsis (LON:TRCS) have performed very well, and am kicking myself for not having bought any when it was recommended to me by a friend some time ago. They are a small software company, supplying mainly systems to manage public transport, especially trains. Serial out-performing trading statements have brought it a loyal investor following & strong share price rises. The shares are up 10p today to 143p, a mkt cap of £35.6m. Growth is stellar, with turnover up 112% to £8.7m (only a quarter of the mkt cap though), and adj EBITDA up 164% to £3.3m. Cash balances are very strong, up £2.9m to £7.6m.

In fact it has a cracking balance sheet, with current assets of £9.1m (incl. £7.6m in cash), and just £3.4m total creditors. So that gives them about £5-6m in surplus cash that could be used for acquisitions or divis/buybacks. Stingy dividend though, only 0.55p for the full year.

The outlook sounds buoyant, but I wonder how sustainable these figures are? I don't know how much of the revenue is recurring, is there not a risk that at some point the large new contracts could dry up, and profits might vanish?

The bottom line is this. If profits growth can be maintained, then with 10p EPS in the bag for y/e 31 July 2012, the shares are cheap on a PER of 14. OR, if those profits are unsustainable in the long run, then the company could be set for a fall. On balance I don't want to take the risk, so will pass on this one. But I can see the logic for holding, if you know more about the business than I do, and are convinced it can continue growing. 

Indigovision

Note that Indigovision (LON:IND) - which is my largest market position - has gone ex-divi today, hence the 85p drop. A 5p final, and 70p…

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