CSP Inc. (CSPI) research, news, and more from GeoInvesting

Company description

Wed, 13 Dec 2023 20:48:09 GMT

CSP Inc. develops and markets IT integration solutions, security products, managed IT services, cloud services, purpose built network adapters, and cluster computer systems for commercial and defense customers worldwide. It operates in two segments, Technology Solutions and High Performance Products. The Technology Solutions segment provides third-party computer hardware and software as a value added reseller to various customers in web and infrastructure hosting, education, telecommunications, healthcare services, distribution, financial and professional services, and manufacturing industries. This segment also offers professional IT consulting services, such as planning, designing, assessment, implementation, migration, optimization, and project management; storage and virtualization solutions; enterprise security intrusion prevention, network access control, and unified threat management services; and IT security compliance services. In addition, this segment provides unified communications, wireless, and routing and switching solutions; custom software applications and solutions development and support services; optimization, maintenance, and technical support services; and managed IT services, such as monitoring, reporting, and management of alerts for the resolution and preventive general IT, as well as IT security support tasks. Further, this segment offers managed and cloud services, such as proactive monitoring and remote management of IT infrastructure, managed and hosted unified communication services, security, and backup and replication. The High Performance Products segment offers ARIA Software-Defined Security, a cybersecurity solution; Myricom network adapters; and multicomputer products for digital signal processing applications in the defense markets. CSP Inc. was incorporated in 1968 and is headquartered in Lowell, Massachusetts.

Research

Tue, 02 Apr 2024 14:42:24 GMT

Csp Inc. (NASDAQ:CSPI) ($17.93; $174.8M market cap) in our weekly email we discussed CSPI as a stock we had on bench for possible buy on pullback model portfolio 11.

“Csp Inc. (NASDAQ:CSPI) (114.7% peak return) – Third party Information Technology Solutions (recently launched a proprietary cyber security product).”

To add a caveat:

We have not done our full due diligence, the last 2 quarters have been dismal, coupled with cautiously optimistic verbiage on conference call.

Reasons For Tracking

Thu, 28 Sep 2023 18:26:34 GMT

New Reasons For Tracking (RFT) on CSPI

Csp Inc. (NASDAQ:CSPI) ($17.45; $82.4M market cap) develops and markets IT integration solutions, security products, managed IT services, cloud services, purpose built network adapters, and cluster computer systems for commercial and defense customers worldwide.

CSPI has been a stock we’ve been watching for some time to see if management could address its inconsistency in maintaining growth in sales and earnings.

A new AI-driven product launch on the heels of decent Q3 2023 results, now, has us taking a closer look at CSPI for the following reasons.

Strong Q3 2023 results (reported August 9, 2023)
- Sales of $17.7 million vs $13.3 million in the prior year
- EPS of $0.18 vs $0.15

"While we expect our TS business to continue to grow, we also believe our newest product launch, ARIA Zero Trust Protect, will be a growth driver for the High Performance Product (HPP) business in the coming years.

Conference call comments related to new Zero Trust Architecture (ZTA)Product

“The advanced and patent AI-driven technology is garnering interest from leading customers and reaffirms our belief that gives us greater confidence that it will be a game-changer for CSPi. We have quite a few customers prior to the launch of AZT, and we envision it's going to accelerate adoption of the ARIA product line and generate a reliable stream of monthly revenue for our company.

As we move through the fiscal fourth quarter and expectations for fiscal 2024, we believe the success, reliability and consistency of our TS business will be complemented by the HPP business, primarily as the buzz being generated from our AZT PROTECT converts to orders, positioning us to significantly expand revenue and gross margins from this product line in fiscal 2024 and well beyond.”

The stock’s recent pullback may provide a reasonable entry point on this very illiquid stock. Shares trended higher from about $7.00 exactly a year ago to a recent new 52-week high of $26.39 on September 19, 2023, before pulling back hard with the rest of the market to the $17 to $18 range. The stock was around $15 when it released its second quarter results. The company only has 4.7 million shares outstanding with roughly 3.3 million in the float.
The company has a strong balance sheet with $16 million in cash and less than $2 million in debt.
The company pays a small dividend, roughly 1% yield.
Valuation Multiples: The company currently trades at Price-to-Sales (P/S) and Enterprise Value-to-Sales (EV/S) multiples of around 1. Given its presence in the IT services space and the potential of its new AI-driven Zero Trust Architecture (ZTA) product, these valuation multiples could materially expand.
On the other hand ,trailing non-GAAP EPS is around $0.63, giving the stock a price to earnings ratio of 27.6, which is lofty. It's going to be interesting to see if investors place more weight in valuing the company on its revenue vs. its earnings per share.

Caveats:

Tax Gains: Tax gains in the last quarter may be disguising the actual Price-to-Earnings (P/E) ratio on certain platforms. Investors should carefully consider the impact of these tax gains on the company's financials.
Uncertainty: The level of contribution that the new AZT PROTECT product will have in the coming quarters is unclear. Investors should be cautious and monitor how the product performs and contributes to the company's financials over time.

If you want to learn more about zero trust architecture, please refer to this article, published on August 28, 2023 by one of our new research contributors, Henry Silcock.

Henry provides a quick explanation of what how ZTA addresses the ongoing battle with cybercriminals:

“The Zero Trust Architecture (ZTA) approach is a new paradigm for cybersecurity which will help address these problems, making cyberattacks more difficult and minimizing damage when a breach does occur. ZTA also helps address recent trends in enterprise networks, such as remote users, BYOD and cloud-based assets. Careful implementation of ZTA principles can allow your business to adopt an effective, proactive approach to cybersecurity rather than reacting only when problems arise.”

Research

Wed, 04 Aug 2010 04:00:00 GMT

We unsuccessfully attempted to trade Csp today. Generally we would have not been so quick to unwind a position that just reported solid fiscal 2010 third quarter. But after listening to the call, two issues led us to sell our position:

Although the fourth quarter will likely show strong EPS growth, management's overall net income growth goals are only set at 10.0%
One of the company's major customers was acquired by a competitor.