Wireless Telecom Group Profitable Net Net Play

I have written quite a few articles on companies that meet the Benjamin Graham net net standard. Benjamin Graham created a investment process that was designed to avoid risk. This is done by investing in companies that sell for less than their net current assets. Over the last 60 years net net's have gone away and most companies that do sell below their net net value aren't worth investing in. However, there are profitable micro-cap companies that at time sell below net net value. Wireless Telecom Group (WTC) is one of these profitable micro-cap companies that sells near net current asset value.
The company is a no brainer investment - it has no debt, it's profitable, it has large cash reserves, and it sells below book value.

Wireless Telecom Group was founded in 1985 in New Jersey and they are in the business of designing and manufacturing radio frequency (RF) and microwave-based products for the wireless and communication industry. The company's products can be used by the military for jamming radio signals and for testing purposes.

The company sells various products through three brands:
  1. Boontoon Brand - Manufacturers test equipment dedicated to measuring RF and microwave systems that powers the Telecommunication market.
  2. Microlab Brand - Sells products for commercial applications such as wireless base stations for cellular, paging and private communication.
  3. Noisecom Brand - Sells electric noise generation equipment to commercial and the military telecommunication field.

Over the last four years the company's revenues have grown from $24.6 million to $40.3 million. However, while revenues have increased, net income has been flat, and in 2014 it drop to $2.4 million from $3.84 million. The company net income didn't fall from operating problems but from a large swing the company's tax bill. Wireless received a large tax refund in 2013, and in 2014 had to pay a big price for that tax refund at a 47% rate.

Wireless Telecom largest source of revenues come from its Network Solution Segment which produces earnings of $7.55 million on revenues of $28.21 million. Wireless Telecom Group Network Solutions Segment is 69% of the company's revenues and 87% of its earnings in fiscal year 2014.

Break Down Of Wireless Revenues From Business Segments:
Segment2014 Rev% of Rev
Network Solutions28,211,60969.9%
Test and Measurement12,125,75930.1%
Total$ 40,337,368100.0%

Break Down of Wireless Earnings From Business Segments:
Segment2014 Income% of Income
Network Solutions7,555,57887.4%
Test and Measurement1,085,35712.6%

During the second quarter the company reported a decrease in net sales to $8.21 million from $10.43 million in the previous second quarter last year. The company saw a 23% decrease in sales from the previous quarter last year. Wireless Telecom Group's decrease in sales came from soft demand for the company's Network Solution products caused by customers deduction in capital spending. However, the company believe that this is short-term and the global expansion in broad band will continue.

The bulk of the company's revenues and earnings come from its Network Solution Segment. Wireless Telecom Network Solution is impacted by the capital spending for data and communications network. Revenues for the company is dependent on commercial upgrades of 4G wireless communication equipment, products and services. However, the telecommunication industry globally will continue to upgrade to 4G wireless networks increasing demand over the long-term for the company's products. The company has no debt and cash makes up the bulk of the company's current assets. Wireless is a great long-term investment that investors should put on their watch list and wait for it to fall below net current asset value.
Published on Oct 2, 2015
By Cody Eustice
Cody is a freelance writer who has been writing financial articles for various sites for over a year now. He is a value investor looking for companies that sell for far less than their estimated business value.

Copyrighted 2020. Content published with author's permission.

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