Small cap machine-to-machine (M2M) stock Elecsys Corp (NASDAQ: ESYS) jumped 8.99% yesterday and is up 254% over the past year, meaning it might be time to take a closer look at the stock and its performance verses other small cap M2M stocks like Digi International Inc (NASDAQ: DGII), Numerex Corp (NASDAQ: NMRX) and Sierra Wireless, Inc (NASDAQ: SWIR). First of all though, I should mention that machine-to-machine (M2M) broadly refers to technologies that allow both wireless and wired systems to communicate with other devices of the same type and this can be through any type of technology ranging from instruments to networks to applications that create connections between devices.
With that broad definition in mind, what is the potential for the entire M2M industry? According to the Strategy Analytics research group, the M2M industry will grow from a $45 billion market last year to an estimated $242 billion in 2022 with areas like healthcare industry, consumer electronics, utilities and vehicles seeing major revenue growth.
What is Elecsys Corp?Small cap Elecsys Corp provides innovative M2M communication technology solutions, custom electronic equipment and displays for critical industrial applications worldwide. The company's primary markets include energy production and distribution, agriculture, transportation, safety and security systems, water management, aerospace and military while solutions encompass wireless remote monitoring, industrial data communications, mobile data acquisition and rugged display technologies. Proprietary technology and products are developed, marketed, manufactured and supported under the Pipeline Watchdog, Director, Radix and DCI brand names.
As for potential small cap M2M peers or benchmarks, Digi International calls itself the M2M expert as it provides the industry's "broadest range" of wireless products that are tailored to allow any device to communicate with any application, anywhere in the world; Numerex Corp provides interactive and on-demand M2M enterprise solutions through its integrated M2M horizontal platforms which are generally sold on a subscription basis; and Sierra Wireless provides M2M devices and cloud services, including a comprehensive portfolio of 2G, 3G and 4G embedded modules and gateways that seamlessly integrated with its secure M2M cloud services.
What You Need to Know or Be Warned About Elecsys Corp?Its hard to explain why Elecsys Corp suddenly jumped on Monday as there is not much news in general about the company on various financial news sites. However, the trading volume was 86,398 shares verses a daily average of around 48,000 shares being traded.
In early December, Elecsys Corp announced fiscal second quarter results, reporting that revenues increased 19% to $7,330,000 while total revenues year-to-date rose 36% to $14,104,000 from $10,395,000. Backlog stood at approximately $12,423,000 on October 31, 2013, an increase of $3,930,000, or 46%, from a backlog of $8,493,000 on April 30, 2013 (thanks in part to a $1.25 million order from the Al Rushaid Group to supply remote monitoring equipment for deployment in Saudi Arabia) while net income came in at $653,000, or $0.17 per diluted share, verses net income of $413,000, or $0.11 per diluted share.
Moving forward, Elecsys Corp expects that total revenues for its proprietary products and services business segment will continue to grow during the second half of the fiscal year thanks to continued investments in both sales and marketing and new product development. In addition, the company anticipates that both its wireless remote monitoring solutions and industrial data communications will show increases in revenues while OEM revenues will grow moderately over the longer term based upon current backlog and the anticipated addition of new OEM customers plus revenues for mobile data acquisition products and services will likely be consistent with revenues reported in the last fiscal quarter.
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With that in mind, I should note that so far, there are no analysts covering Elecsys Corp and only 6% of shares are held by institutional or mutual fund owners (32% are held by insiders or 5% owners).
Top Institutional Holders
| Dimensional Fund Advisors LP | 62,220 | 1.63 | 497,760 | Sep 30, 2013 |
| Royal Bank of Canada | 41,962 | 1.10 | 335,696 | Sep 30, 2013 |
| Morgan Stanley | 17,646 | 0.46 | 141,168 | Sep 30, 2013 |
| Bristol, John W. & Co. Inc | 16,200 | 0.43 | 129,600 | Sep 30, 2013 |
| Wells Fargo & Company | 9,600 | 0.25 | 76,800 | Sep 30, 2013 |
| CALPERS (California-Public Employees Retirement System) | 7,200 | 0.19 | 57,600 | Sep 30, 2013 |
Then again, its probably only a matter of time before the stock's performance (should it keep rising) grab the attention of more investors on Wall Street.
Share Performance: Elecsys Corp vs. DGII, NMRX & SWIROn Monday, small cap Elecsys Corp rose jumped 8.99% to $14.30 (ESYS has a 52 week trading range of $3.93 to $14.86 a share) for a market cap of $54.44 million plus the stock is up 254% over the past year and up 333.3% since March 2009. I should also mention that we added Elecsys Corp to our SmallCap Network Elite Opportunity (SCN EO) portfolio just before the holidays and we are already up some 11.72% over the past few weeks.
Here is a look at the performance of Elecsys Corp verses that of small cap M2M stocks Digi International, Numerex Corp and Sierra Wireless:
As you can see from the above performance chart, Elecsys Corp's performance was relatively flat up until late 2012 when the stock started to take off while shares of Numerex Corp and Sierra Wireless have actually been the best performers since the end of the financial crisis.
Finally, here is a look at the latest technical charts for all four small cap M2M stocks:
The Bottom Line. If you are looking for a small cap stock in an industry with significant growth potential, M2M stocks like Elecsys Corp along with peers like Digi International, Numerex Corp and Sierra Wireless could all be well worth taking a closer look at.
SmallCap Network Elite Opportunity (SCN EO) has an open position in ESYS. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.
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