PodClip - VirTra Systems, Inc (VTSI) - Mark Gomes on Growth Catalysts
Transcript
Hi, I'm Mark Gomes and on today's pod clip, I'm going to tell you why I think VirTra, Inc. (VTSI) can triple in value within the next 12 months.
But first a little bit about myself. Again, my name is Mark Gomes. I'm a technology analyst with over 27 years of experience serving Wall Street institutions. I retired in 2009, at age 38, thanks to a never-ending supply of great small cap stocks to invest in. I now, with a team of Wall Street veterans, donate time to give my picks for free to the public, on various internet platforms, all of which can be found via my home website at Markgomesstocks.wordpress.com.
So, at present, I have four large positions in my portfolio, which I expect to triple over the next year or so. Today, I'm going to give you a quick synopsis on VirTra, Inc. (VTSI). VirTra is a $7 small cap with a small float led by Bob Eris CEO, who's been running the company for decades. There's strong inside ownership and low dilution at this company. Since inception, they've got over $20 million of cash and an enterprise value of just $60 million.
Now, what makes VirTra an interesting company is that they are actually considered to be the Cadillac when it comes to training law enforcement agencies through their virtual reality system. It's a 300 degree, not quite 360, but a 300 degree system, life size, that puts law enforcement people into an immersive environment where they can interact with situations that they will encounter in real life
So, if you think about the George Floyd situation, their system is exactly what is meant to help avoid situations like that. And since the George Floyd situation, there has been increased national attention and scrutiny around Law Enforcement Training, which creates an inflection point for VirTra.
As the top player in the space, they still only garner $20 million in revenue, most of which, of course, comes from law enforcement training, but they also provide military training. Now, the market for law enforcement training is estimated to be close to $300 million in the US in terms of opportunity. And that opportunity is now starting to be unlocked by virtue of the public outcry for better law enforcement training. And in fact, Georgia has already released $6.7 million to train local law enforcement and other security related organizations.
If you figure that out, it actually works out to about 300 million across the United States. So the numbers all match up relative to what we've been told by VirTra and what we're seeing in the real world.
So, that is on the police on the law enforcement side of the equation. That alone is enough to make this company grow much more rapidly than it has in the past. And by the way, they have grown 16 years in a row every single year.
Now, speaking to the CEO, I figured out that if they get their revenue up to $50 million from the current $20, their operating model can deliver $1.50 of earnings per share. Now, if you apply just a 20 P/E to that you're talking about a $30 stock, currently in the $7’s. This is something that the $300 million law enforcement opportunity can supply on its own.
But as I alluded to earlier, they also provide solutions to the military market. And there, they are already providing the military with different solutions. They're not the Cadillac, but they have certain solutions where they are patented. And I'll tell you about that in a second.
But first, you should know that the army is currently rolling out an Integrated Virtual Augmentation System. IVAS, for short. It's a virtual reality system. Think of it as the most sophisticated military video game in history designed to train soldiers. It's powerful. Powered by the Microsoft HoloLens. So that is basically the visualization of the training that the military will receive. And the military wants 100,000 units is what we've heard of this HoloLens.
Now, Microvision, another publicly traded company, MVIS, provides components to the HoloLens. News of this sent Microvision from 20 cents during COVID to $20. This year. That's right. A 100-bagger from 20 cents to $20. Well, the research from my team leads us to believe that VirTra is going to represent the controller and other peripherals for this ultra-sophisticated virtual reality game. Okay. And the reason is that they have patented technology, that one can take a real gun, which is what the military wants to train its soldiers with.
But of course, in a virtual reality environment, you can't use a real gun. Or can you? Well, this is where virtual comes in, they can retrofit a real gun, take out the parts, put in the patented virtual parts, and the gun will act exactly like a normal gun without the shots being fired. It will give you the kick back, it'll jam, you'll have to change the clip, at regular intervals. Everything is the same. They mount a laser on also to show what you hit or missed in terms of targets. it is the most accurate, and the closest thing you can come to actually shooting a real gun without shooting a real gun.
And we believe that VTSI is going to be supplying these to the military as part of the IVAS program. Just part of our evidence is that they have added a second shift to manufacture these devices, which they didn't need obviously before. And an Army logo now appears on their materials, the company marketing materials that they've been showing the conferences, so clear evidence to us, on top of what we've already seen in the marketplace. And the fact that the military wants the best solution. And this is it.
Also, there's a shock kit that they have that they can attach this device to personnel. If you receive return fire, which is what the military wants, you want to have a stressful environment. So, the soldiers are not only just trained to play this game, right, but to actually do it under stress. There's a shock kit that is also patented, that provides that element.
So, there's a great deal of solutions here that VirTra will be supplying and has been supplying to the military. And we believe that this IVAS program with the 100,000 units that they're seeking could/would represent $10s of millions of dollars of revenue to VirTra.
To sum it all up, we have the police opportunity, which by itself could send the company to a point where they could do $1.50 of EPS, our team believes. Plus, this military opportunity, which could do the same. Either one of them can send VirTra down the path of making $1 $2 or more in EPS. If they get both. I mean…of course all bets are off, even better.
And then the third thing is of course there are lots of other larger organizations out there that particularly serve the military and also law enforcement as well, but a small piece within a large organization. And so, we believe that VirTra could be acquired as a very attractive play on law enforcement and military training. So that's it for today's PodClip on Virtua, VTSI. Stay tuned for more of my picks and perhaps a longer discussion with Maj about VirTra. Take care.
