Wi-LAN Could Double And It Has A 6% Yield
posted on
Feb 05, 2015 09:13AM
Intellectual Licenses for Electronics & Communications
Disclosure: The author is long WILN, AAPL. (More...)
Wi-LAN (NASDAQ:WILN), based in Ottawa, Canada, is a leader in intellectual property licensing, originally in the television and wireless markets, and now licensing patents in the medical, energy, semiconductor, and vehicle areas.
Although the company has run into a few financial issues during the latest quarter, it has lot of upside going for it with a potential for a home run. The positives greatly offset the negatives, which can make this stock move higher.
First the bad news. The company recently reported adjusted earnings for the fourth quarter of last year at $12.2 million or 10 cents per basic share versus $17.2 million or 14 cents per basic share for the same period a year ago, a 29% drop on an overall earnings basis and 28.5% reduction on a per share basis. [All number in Canadian dollars.] This news has caused a drop in the price of the stock, which is an over-reaction. There are several reasons why, making this stock a buying opportunity.
Let's look at the numbers on an annual basis. Adjusted earnings for the year rose from $17.6 million to $58.7 million for the previous year, an increase of over 233%. On a per share basis, earnings went up by 226%.
What about guidance? To start with, the company has beaten its revenue guidance three years in a row. For the fourth quarter, the company reported revenues of $22.1 million, exceeding its guidance of $20.6 million by over 7%. In addition, adjusted earnings for the quarter exceeded guidance by more than 32%.
How about future financials? In regards to the first quarter of 2015, Wi-LAN anticipates revenue to be at least $17.5 million. Yet, this is an extremely low number, and there is more to this than meets the eye. The company bases its guidance on royalty reports through January 27. Yet more than half of the running royalty reports are not due until January 31. In addition, this number does not take into consideration the future license agreements that occur before the end of March.
So what does this mean to the investor? Let's conservatively assume that the $17.5 million represents only half of the actual future revenue for the quarter. This brings the quarterly revenue up to $35 million, and if you annualize it, it becomes $140 million. This gives a sales per share of $1.16. Based on the current price/sales ratio of 3.29, the stock should be trading at 3.83, a 39% premium over where the stock is trading now.
http://seekingalpha.com/article/2885836-wi-lan-could-double-and-it-has-a-6-percent-yield