For those who might have missed it, there was a very positive...

For those who might have missed it, there was a very positive write up on Adacel in the FIN's 'smart investor' section on Friday (hence the reason for the recent buying). The article -- entitled 'On the Cutting Edge' -- focused on three companies where 'the share price doesn't accurately reflect the company's value.' Each company was selected on the basis of 'performance not promises', and each company 'has earnings outlooks that suggest there is room for shareprice growth.' The author (who sounds as if he has been reading some of my old posts) made four main claims specifically about Adacel:

(1) Adacel's revenue and earnings are now more predictable and certain because of increasing recurring revenue (now 45%+ of total revenue).

(2) The company expects to get a number of large contracts in North America over the next four years, and has emerging opportunities in China and India.

(3) The company is trading on a very low earnings multiple.

(4) The company 'looks well placed to exceed the full year result of FY06.'


Up until recently, Adacel had been ignored by virtually everyone (except those 4 or 5 savvy investors who are regular, long term readers of this thread). In my opinion this positive mainstream media (and recent analyst/broker) focus on Adacel will only increase over the coming months, and especially following the full year results.

To get a conservative sense of where Adacel's market cap is heading over the next 4-6 months, choose a realistic 07 full year NPAT number (between 6 and 7) and multiply it by 20.

And to get a sense of where Adacel's market cap is heading over the next 18 months, choose a realistic 08 NPAT figure (between 8 and 9) and multiply it by 25.