May 5, 2014 - TASER International is More Than its Eponymous Stun Gun
We have all seen the dash camera videos on the evening news of a police officer facing a crazy decision. People are drunk, doing unbelievable things and the officer just has a moment to respond.
Every day the police officers that protect us face some pretty tough decisions. They run into criminals, accidents, tense situations and natural disasters. They never know if the next call is going to be something simple like a stranded motorist or something more complex involving an intoxicated person making some very poor decisions.
I can only imagine some of the split second decisions officers have to make when it can be a matter of life and death. I can also only imagine some of the crazy situations they find themselves in with emotional out of control people who want to fight. To help in those cases many police officers now carry Taser weapons giving them the option to zap a non-compliant individual from 15 feet away to regain control of the situation.
TASR stock was very hot a few years ago, and then cooled for a while. The stock has made a comeback and could see continued growth. Tasers are carried by about half of American police officers, only about 1 in 50 international police officers carry the weapon. This means TASER (TASR) still has room for growth both domestically and internationally.
While dash cameras have been recording police stops for years, they do not always show the full interactions with police. To that end new technology is coming that has police wearing small cameras which record everything they do. The recording abilities of small cameras have been here for years, but management of the video in a simple, secure, legal way is something that TASER international is doing through Evidence.com. Time is money for police departments, courts and prosecutors who do not want to spend countless hours managing video. Evidence.com makes it simple for small police departments to add cameras to officers and manage the video. This recurring revenue stream can help TASR because it is ongoing.
Video makes up a small but growing portion of the revenues, posting $5 million of the recent $36 million reported in the first quarter of 2014. Last year, TASR reported about $137 million in revenue for the small $1 billion market capitalized company. TASR is much smaller than most of the companies we cover but it has an interesting story and some unique potential, but a high a P/E ratio of 52.
Chart courtesy of stockcharts.com
While Taser lost money in 2010 ($-0.07) and 2011 ($-0.12) the company, pulled in $0.27 in profits in 2012 and $0.37 in 2013. Sales were up 21% last year while earnings rose 37%. International sales made up more than a quarter of revenue at TASR during the most recent quarter. The company just reported $0.06 for the quarter, beating expectations of $0.04, but dropped about 5% possible due to an drop in EBITDA from $7.7 million last year to $7.2 million.
TASR has some exciting potential, but it also has a long road ahead. The September 16 call on the stock has a bid of 1.85 while the stock is trading at 16.15. This means the buy-write has a net debit of 14.30 with an 11.8% return over 142 days for a 30% annualized return rate (for comparison purposes only). This just in the money call option gives 11.5% of downside protection to the stock. As Taser starts shooting more suspects on video and with stun guns, the company can become a more vital part of law enforcement. Tasers have become an integrals part of law enforcement, other technology is sure to join. Take a look at the returns on the covered call to see for yourself.