Image Sensing Systems, Inc (ISNS) is a provider of above ground detection and information management solutions for the Intelligent Transpor...

Weekly Superstock Scan 15 Aug 2016 - 19 Aug 2016: Image Sensing Systems, Inc (ISNS)

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Image Sensing Systems, Inc (ISNS) is a provider of above ground detection and information management solutions for the Intelligent Transportation Systems (ITS) sector. ISNS separate its business into two segments:
  • Intersection: Autoscope® video detection family. Autoscope video detection captures video images of traffic and analyzes the information using sophisticated algorithms for traffic management.
  • Highway: RTMS radar detection family. RTMS radar detection products are working hard to ensure smooth traffic flow and prevent road accidents.

Technical





ISNS reported its Q2 result after market on 5 Aug, Friday. The closing price was 2.42. The following Monday, ISNS more than doubled to open at 6.09. It continued to move up to 6.39 and promptly retraced to close at 4.05. Through out the week, it continued to move down and finally closed at 3.50 at the end of the week, which was still close to 50% above its previous week's closing price. The volume for the week was 17.2 million shares, 16 times its average weekly volume of slightly above 1 million shares.

ISNS was a previous superstock back in 2014. Then it moved from low $2 to close to almost $10 in two weeks. It couldn't hold its gains and went back to the $2 region in another 4 weeks time.

Fundamentals



Including the current quarter, ISNS has registered 7 consecutive quarters of year-on-year (yoy) increase in EPS. While the earnings have improved through the years, it is to note that the current quarter was the first quarter since 2012 that ISNS reported a positive EPS.

Disposal of License Plate Recognition (LPR) Business

On July 9, 2015, ISNS sold its LPR business to TagMaster A.B. for the purchase price of $4.2 million in cash. ISNS decided to shift its strategic direction on the Intelligent Transportation Systems (ITS) market by investing in its Autoscope video and RTMS radar products and solutions. 

Looking at last year's Q2 results, the LPR business was accountable for the loss making quarter. Excluding discontinued operations, ISNS would have reported a $0.13 EPS instead of -$0.15. 

Growing Acceptance of Sx-300 RTMS

ISNS has attributed the increase in revenue and income in the current quarter to the growing acceptance of Sx-300 RTMS. The RTMS Sx-300 is a small roadside pole-mounted radar, operating in the microwave band. Simultaneously, the sensor provides per-lane presence as well as volume, occupancy, speed and classification information in up to 12 user-defined detection zones. 


ISNS has come out with new variants of the Sx-300 which includes HD camera and bluetooth.

Expanding Markets

ISNS announced last week that announced today that they will be directly working with channel partners, system integrators and end users for the distribution and support of the North American format of Autoscope video detection products in Middle East, Central and South America and Asia.

Matrices
+ Annualised P/E of just 3.65. 
+ Extremely small float of 1.1 million shares. Wiith an average volume of 330 thousand shares, the float is just 3 times its average volume. This stock can move real fast.

Risk Factors/ Things I do not Like

  • Decreasing Royalties - While its Highway segment is doing well, the same cannot be said for the Intersection segment. The decrease in royalties was the result of a decrease in Autoscope® video system sales volume under the Econolite agreement. While ISNS is working with Econolite to address the issue, there is nothing much ISNS can do about it.
  • Reliance on Governmental Entities - As the majority of its end users are governmental entities, ISNS is faced with challenges related to potential delays in purchase decisions by those entities and changes in budgetary constraints. The ongoing economic environment in Europe and the United States is further adding to the unpredictability of purchase decisions, creating more delays than usual and decreasing governmental budgets, and it is likely to continue to affect ISNS' revenue.
  • Overhead supply - When price surges up last week with high volume, there will be many buyers who could not get out in time when price retraces quickly. They will be looking to get out at breakeven, and that may slowdown any increase in price.


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