PROFIT MARGIN: [PASS]
This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. GEOS's profit margin of 15.58% passes this test.
RELATIVE STRENGTH: [FAIL]
The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. GEOS, with a relative strength of 13, fails this test.
COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL]
Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for GEOS (-113.33% for EPS, and -61.52% for Sales) are not good enough to pass.
INSIDER HOLDINGS: [PASS]
GEOS's insiders should own at least 10% (they own 46.03% ) of the company's outstanding shares which is extremely attractive since the minimum requirement is 10%. A high percentage indicates that the insiders are confident that the company will do well.
CASH FLOW FROM OPERATIONS: [PASS]
A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. GEOS's free cash flow of $2.63 per share passes this test.
PROFIT MARGIN CONSISTENCY: [FAIL]
The profit margin in the past must be consistently increasing. The profit margin of GEOS has been inconsistent in the past three years (Current year: 15.58%, Last year: 23.14%, Two years ago: 18.32%), which is unacceptable. This inconsistency will carryover directly to the company's bottom line, or earnings per share.
R&D AS A PERCENTAGE OF SALES: [NEUTRAL]
This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in GEOS's case.
CASH AND CASH EQUIVALENTS: [FAIL]
Unfortunately, the data is unavailable for GEOS. Hence, an opinion cannot be rendered.
INVENTORY TO SALES: [PASS]
This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for GEOS was 49.75% last year, while for this year it is 61.58%. Although the inventory to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive.
ACCOUNT RECEIVABLE TO SALES: [PASS]
This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for GEOS was 18.31% last year, while for this year it is 11.98%. Since the AR to sales is decreasing by -6.33% the stock passes this criterion.
LONG TERM DEBT/EQUITY RATIO: [PASS]
GEOS's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow.
"THE FOOL RATIO" (P/E TO GROWTH): [FAIL]
The "Fool Ratio" is an extremely important aspect of this analysis. Unfortunately, GEOS's "Fool Ratio" is not available due to a lack of one or more important figures. Hence, an opinion cannot be given at this time.
The following criteria for GEOS are less important which means you would place less emphasis on them when making your investment decision using this strategy:
AVERAGE SHARES OUTSTANDING: [PASS]
GEOS has not been significantly increasing the number of shares outstanding within recent years which is a good sign. GEOS currently has 13.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock.
Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. GEOS's sales of $236.9 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". GEOS passes the sales test.
DAILY DOLLAR VOLUME: [FAIL]
GEOS does not meet the Daily Dollar Volume (DDV of $0.0 million) test. It is required that this number be greater than $1 million and less than $25 million because these are the stocks that are liquid but remain relatively undiscovered by institutions. GEOS is too illiquid to be considered attractive at this time.
This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. GEOS's price is not currently available. Therefore the current price cannot be evaluated at this time.
INCOME TAX PERCENTAGE: [PASS]
GEOS's income tax paid expressed as a percentage of pretax income this year was (31.06%) and last year (31.20%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.