“They're going to buy back approximately 10% of those slices…”
No. In all likelihood PME will not buy back 10% of the stock or anything like that amount. What seems is being missed in this discussion of the buy-back notifications is that just because a company puts a buy-back facility in place to buy up to 10% of the stock does not mean that they will carry it out or have any intention of doing so.
For at least the last 10 years PME have always put a standard 10% buy-back facility in place each year. However, if you go back and look at the number of shares actually bought back, it is just a trickle. Given PME’s high PE, the company simply does not generate enough cash to buy back a substantial percentage of its own stock.
So, if they cannot have a market moving effect with the scale of their buy-back purchases , then why put the buyback facilities in place? I think it is signalling device and the PME management uses it as precisely that. A buy-back is a permitted way for management to say to the market, given all the inside information that management knows about the company’s prospects, that they think that the market has overdone whatever the pullback in the share price might be.
This is especially relevant because PME doesn’t give earnings guidance because their contract pipeline behaves like a bottle of chunky tomato sauce. They know that the contract possibilities are in the pipe but It’s hard to predict exactly when the next large one will pop out. However, when they think that the market has got the wrong end of the stick, the buyback facility allows the management to use some of their relatively scarce cash in order to signal their opinion to the market via a buy-back purchase. (Due to PME's high PE, their cash will always be relatively scarce compared with the market capitalisation of the company. Whereas, a company with a PE of say 15, can buy back a meaningful percentage of its shares using their profits and spare cash.)
In other words, a buy-back purchase amounts to trading with inside information that is actually entirely permitted and that everybody can see.
I think that PME’s most recent buy-back purchase of shares is an example of what I have described above. After the half year results were announced in mid-February, the share price dipped below $90, So, the company stepped in and used a million dollars to buy 11,300 shares, or just 0.01% of the company, which is a pittance overall. However, it was a way for the management to say to the market, “Get a grip, if you thought that we were worth over $100 a month back, then there is nothing that has changed in what we know about our business that justifies dropping the price below $90.”
As Thunderhead has noted, thus far, PME’s management have been on the ball with their buy-back purchases. PME have only ever bought back shares in pullbacks and every share that they have ever bought back is now well in the money. Investors could have done a lot worse than following their lead.
I am more interested in the FedRAMP "high' certification that has reportedly been belled by Evans & Partners. and what that may mean for possible contracts with the US VHA and MHS. I still haven't been able to find any public confirmation of such a certification. However, in my searching, I did come across this notification of small US $3.9m contract dated 18 Jan 2024 with Veterans Affairs..
I think that it may be a renewal of an existing contract , but US government documentation seems to be designed to be impenetrable. Which is perhaps why software companies of all scales seem to resort to using Blue Tech to deal with the Federal government. The Blue Tech website proclaims that it is “Dedicated to Meeting Federal IT Needs”. They list Visage as one of their “suppliers”.https://bluetech.com/partners/ Cheers
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