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Summary

• Titan Logix Corp. sells a unique line of substantial-technological innovation gauges for tanker trucks.
• It's a fifty three% gross margin business with no personal debt that presently sells for just four.8x run-fee earnings and two.8x EBITDA, internet of its income.
• While the organization has the likely to double or triple earnings above the following four several years, it's filth-inexpensive dependent just on existing earnings.

Titan Logix Corp. (OTC:TPCFF, TSX:TLA) is a modest Canadian organization that makes radar-primarily based fluid amount measurement units (replacing less trustworthy mechanical systems) for tanker vehicles, until lately virtually completely for crude oil tankers, but now expanding into other sectors. I previous wrote about Titan in April 2014, and considering that then, the company has carried out magnificently, while the stock has gone nowhere. (In reality, it really is even down a bit.)

Very last 7 days, Titan described a great Q1 for fiscal 12 months 2015, earning .04/share (up 33% calendar year-in excess of-12 months) and producing $one.6 million in EBITDA (up 37%) on earnings of $five million (up fourteen%). If we annualize these figures, whilst assuming roughly 26 million completely-diluted shares and .49/share in net income, at yesterday's closing price of CAD $1.18, the firm sells for only close to 4.3x earnings and two.8x EBITDA.

A single cause Titan's stock hasn't moved is that the bulk of its classic radar gauge product sales appear from freshly constructed cellular crude oil tankers, and of training course, the cost of oil has just lately plunged. Nevertheless, there are equally quick-expression and long-phrase reasons why I think this shouldn't scare a single absent from the inventory...

Limited-term, sales of Titan's gauges are tied to oil generation and not drilling, and although at some point less drilling will end result in considerably less manufacturing, all modern estimates I have witnessed point out that North American oil manufacturing for 2015 must be higher than at any time as producers run their current wells flat out in get to maximize profits.

For a longer time-term, concurrent with the latest lessen in the price of oil, Titan has been growing its enterprise "laterally" in methods that could make up for any late-2015 reduction in new crude tanker product sales, as it not too long ago commenced emphasizing retrofit income of its latest networked gauges to existing crude tankers (thereby creating considerable productivity enhancement), as properly as the sale of newly created gauges for aviation fuel tankers, chemical tankers, and squander oil tanker minix neo x8 android tv box.

Even a lot more substantially, late this 12 months, Titan should commence rolling out a portfolio of sophisticated gauges for refined gasoline tankers, a market which is noticeably bigger than its traditional crude marketplace. The business has been co-creating these products with a British company named Mechtronic, and though these gauges were at first envisioned to be on sale in 2014, the engineering function required in conditions of including different attributes and a sophisticated networking capability has taken more time than expected, pushing the existing target again to late-2015.

Because of all the new items that Titan will be rolling out, I consider that above the subsequent four years the company has a possibility to double its earnings and - assuming forty% functioning margins on that further $twenty million in earnings - increase earnings by about one hundred fifty%, to around .40/share in 2018. If we ended up to set a 15x several on that and assume $one.50/share in funds, we'd have a for each share worth 4 a long time from now of $seven.50. If we have been to then price reduction that again by 15% a yr to these days, we might get a internet current worth for the inventory of $4.29/share.

Nonetheless, if that cost sounds as if it's predicated on as well many assumptions (and maybe it is), one particular could merely multiply run-price EBITDA of $6 million by 8x, and add in the present cash and get a existing price of $2.34/share, or put a 15x a number of on .16/share in operate-price earnings, and with the funds get a recent worth of about $2.90/share. Both way, it is a good deal much more than yesterday's closing price of $one.eighteen.

If you do choose to purchase some of this, make sure you preserve in head that there are many times that it trades only "by appointment" (i.e., it can be really illiquid), so you need to measurement your situation accordingly. Also, remember to observe that the most precise cost estimate is received by means of the firm's listing on the TSX Venture trade (priced in Canadian pounds), as the U.S. OTC ticker trades really irregularly as a result, its quoted cost might be out of date. (At current exchange prices, U.S. traders will get close to a 25% discount to the Canadian marketplace price tag when your broker translates the transaction into U.S. bucks.) Lastly, be cautious not to confuse Titan Logix's ticker with people of "Titan Intercontinental," "Titan Equipment," "Titan Pharmaceuticals" or any of the other "Titans" out there!

Editor's Note: This write-up handles 1 or far more shares investing at much less than $1 for each share and/or with less than a $100 million market place cap. Remember to be aware of the pitfalls linked with these stocks.