Telkonet ($TKOI), high growth, cash rich and nearing profitability in the IoT market

TKOI

Until recently Telkonet consisted of two business units:

  1. A high speed internet networking asset business unit
  2. Ecosmart – a business unit operating in the internet of things (IoT) market by providing both IoT devices and software to manage and save energy usage in all types of buildings

The high speed internet business was a business in slow decline generating nice amounts of cashflows. The company used these cashflows to invest in their Ecosmart business in order to stay relevant as a company in the long term.

The initial strategy of the company was to sell the first business unit once Ecosmart would reach profitability. However, recently they could divest the first business unit for a good price. Hence, the company decided to complete the divestiture earlier than planned and while Ecosmart is still unprofitable.

The company expects Ecosmart to be profitable by the end of the year. They expect to accelerate growth now they can fully focus on the Ecosmart business. The growth over the last couple of years has been lumpy but strong.

Recent significant insider buying in the stock by one of the directors sparked my interest. About half of the current market cap consists of cash. With only a couple of quarters of negative cashflow ahead of us (according to management) and good operating leverage, this seems like an interesting opportunity to buy a high growth company in a hot market at a cheap price.

TKOI - insider buying

 

Advertisements