NEUTRAL (DWCH, $4.86)
Moving In The Right Direction, But Slowly– Initiating With A NEUTRAL Rating
August 25, 2015
Investment Conclusion. We are initiating coverage of Datawatch Corporation (DWCH) with a NEUTRAL rating. The company has found a solid niche for itself in the data analytics and visualization area and has gained a large installed base in the financial services market and is expanding into other verticals. It is particularly well positioned for the emerging requirements around streaming data for the Internet of Things (IoT). But despite the overall growth of the data visualization sector, Datawatch continues to languish with relatively small revenues and below industry growth rates. We believe that management has made several positive steps improving the salesforce and the company should see those changes bear fruit over the next several quarters. Also the company has added Dell and Xerox as partners which we believe could accelerate revenue growth over the next year. Despite these positive steps, and taking into account the company trading at a 0.5x multiple based on 2016 EV/revenues, we would prefer to wait on the sidelines until we can have better visibility into revenue growth and profitability that would be commensurate with what we believe is appropriate for such a high growth segment of the software space. As a result we are initiating coverage with a NEUTRAL rating on Datawatch shares.
Source: Company Reports, National Securities Corporation Estimates
Datawatch Corp engages in the design, development, manufacture, marketing, and support of business computer software products primarily in the United States. The company’s products allow users to extract and manipulate data from ASCII report files, PDF files, HTML files, etc. The company sells its products through a direct sales force, value added resellers, and distributors. Datawatch Corp. was founded in 1985 and is headquartered in Chelmsford, Massachusetts...
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