A Short Look at ISOTeam

ISOteam is a stock that has done very well. From about 15cents in 2013, it has since went up to 38.5 cents today. Fundamentally, any company can be solid, but just as likely expensive. The charts indicate that 'investors' are adopting a wait and see attitude most of the time.

Interestingly enough, the management decided to buy back some shares today. For the uninitiated, buying back shares mathematically increase Earnings Per Share (EPS), since there are less shares to go around. However, the amount bought back, 55000 shares, represent a small drop in its ocean of 280++ million shares!

Share buybacks could be used for stock options. I do not think that the stock prices are cheap and there is a pessimistic air about its stock (yet!), hence I question the timing of buying it now.

Reading the annual report, the Myanmar growth story so far yields only a $110,000 project, which is also a drop in the ocean of its 9million or so revenue the entire last year. The annual report mentioned that it has yet to get any new projects locally. This is another warning sign.

Let's take a look at my calculations of its ROIC for the last 4 years. I believe in ROIC-- it prevents me from being blind by exciting revenue growth.
2012- 18.11%
2013- 32.05% <-- mighty good year, but probably abnormal. Should discount for statistical use.
2014- 20.98%
2015- 16.77%

I think ISOTeam definitely needs new projects locally and more importantly overseas, since I believe it isn't cheap on cashflow. Another thing that worries me is the unbalance of power in its Board, since all 3 of the co-founders are in it, and for some reason, they are always around during board meetings that does not require their presence ("by invitation," haha).

The last thing that one should take note of is its acquisitions-- it seems to have overpaid in goodwill for one of them-- but that is my opinion...

In short:

• fair average board with no political links to harness.
• not too convinced of its growth story overseas, and it is possibly running into heavy competition locally.
• dropping ROIC.
• possibly overpaying in acquisitions (acquiring companies is bad enough).

I am not vested, and this isn't a stock I will purchase during a bear market.