The U.S. economy is expanding; personal incomes are increasing and so are personal expenditures. This company makes products that are in some 22,000 retail stores around the nation. If more Americans are earning more and then spending more, a company that well positioned in retail outlets will do well in this expanding economic landscape.
Out of tens of thousands of stocks, funds, and ETFs that trade on global exchanges each represent an individual company which you can analyze using comparative analysis. To determine which one of the two entities, such as Insignia or Dolphin is a better fit for your portfolio, analyzing a few basic fundamental indicators is a good first step.
How important is Insignia Systems's Liquidity
Insignia Systems
financial leverage refers to using borrowed capital as a funding source to finance Insignia Systems ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Insignia Systems financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Insignia Systems' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Insignia Systems' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the
breakdown between Insignia Systems's total debt and its cash.
Correlation Between Insignia and Dolphin Entertainment
In general, Delisted Stock analysis is a method for investors and traders to make individual buying and selling decisions. Stock correlation analysis is also essential because it can help investors realize that they may not be as diversified as they think. Risk management strategies are usually required to make sure all portfolios are properly aligned against their risk tolerance level. You can consider holding Insignia Systems together with similar or unrelated positions with a negative correlation. For example, you can also add Dolphin Entertainment to your portfolio. If Dolphin Entertainment is not perfectly correlated to Insignia Systems it will diversify some of the market risks out of the positively correlated stocks in your portfolio. However, the disadvantage of this sort of hedging is that it can potentially affect your investment returns throughout market cycles. When Insignia Systems, for example, performs excellent and delivers stable returns, the negatively correlated position you locked in as a hedge may drag your returns down.
Are you currently holding both Insignia Systems and Dolphin Entertainment in your portfolio? Please note if you are using this as a pair-trade strategy between Insignia Systems and Dolphin Entertainment, watch out for correlation discrepancy over time. Relying on the historical price correlations and assuming that it will not change may lead to short-term losses. Please check
pair correlation details between ISIG and DLPN for more information.
Breaking down the case for Insignia Systems
Insignia Systems, Inc is a company that deals with point of sale advertising programs. Their products are in over 22,000 store locations worldwide. The company is a smaller company traded on the NASDAQ. Its market capitalization is only $18 million. Its stock is trading at $1.51 per share.
I have been very bullish on the economy of the United States. Earlier this morning, the Bureau of Economic Analysis released numbers for both personal income and personal consumption expenditures. Personal incomes have an annual growth rate of 3.7% and expenditures by consumers has a 4.5% annual growth rate. Consumers are earning more and they are spending more. So, a company like Insignia Systems - ISIG - is positioned well to see an increase in revenue and earnings. Over the years the company has increased its asset quite modestly. But, given its assets, it has increased its gross income considerable and from that its earnings per share. Here are the assets and the gross income for the company over the past couple of years, respectively:
2012: $31,706 / $7,302
2013: $31,572 / $12,746
2014: $30,475 / $11,782
2015: $31,714 / $12,671
Assets have remained relatively stable over the past several years. But, given the assets, revenues have increased over the same period showing that management is proactive in its work on maximizing its potential with what it has available.
Also, earnings per share have increased over the same period, and this is more noticeable:
2012: ($0.12)
2013: $0.10
2014: $0.02
2015: $0.13
Revenues are increasing nicely. You can see the increase from the low of the revenue base from 2012 turning around and increasing to a high of 2015. I am fully expecting this trend to push higher for a longer period as the country’s economy expands and grows more. This will provide the company, ISIG, to earn more income in the future.
Being a much smaller company as ISIG is they are not always on the front radar of trader’s and investor’s minds. Again, the market capitalization is only $18 million. Because of that, the company’s earnings per share is slightly higher than 10-times. The stock is trading at $1.51 at the time of this writing and the earnings per share is expected to come in at about $0.50 per share, off of the $0.13 per share from 2015. That would make this stock a strong candidate for buying in to and holding on for a long period. With the earnings expected to push higher in 2016, and because this stock is lightly traded, this stock has a lot of potential to move to the upside quite quickly.
But, even without any real jump in the next earnings release this company is still positioned to do well going forward with the economy and the fact that the company’s products are in so many stores around the world, 22,000. With that much retail exposure around the country, there is going to be a large opportunity for revenue growth. And given management’s ability to capitalize on its ability to increase its earnings with limited increases of assets, as it did over the past five years, this company should prove to be able to do it again and increase its revenue and earnings consistently.
This stock is above the status of penny stock. It is smaller. But, it has increasing earnings while still having some of the characteristics of a penny stock, priced at $1.51 per share. That means this company’s stock could jump up quickly and jump quite high. This could be an exciting holding in your portfolio. But, you would want to hold on to this stock for a very long period of time.
Building efficient market-beating portfolios requires time, education, and a lot of computing power!
The Portfolio Architect is an AI-driven system that provides multiple benefits to our users by leveraging cutting-edge machine learning algorithms, statistical analysis, and predictive modeling to automate the process of asset selection and portfolio construction, saving time and reducing human error for individual and institutional investors.
Try AI Portfolio ArchitectEditorial Staff
David Taylor is a Senior Member of Macroaxis Editorial Board - Sector Analysis. David is a professional writer who writes for multiple investment news outlets. His primary focus is dynamic movements in financial markets and effects of economic volatility on North American industries and sectors. David has many years of experience in financial service industry including working with major banks as a FX trader. In his free time, he does a lot of outdoors type activities including rock climbing, mountain biking, hiking, mountaineering and kayaking in the summer, and snowboarding in the winter.
View Profile This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and David Taylor do not own shares of Insignia Systems. Please refer to our
Terms of Use for any information regarding our disclosure principles.
Would you like to provide feedback on the content of this article?
You can get in touch with us directly or send us a quick note via email to
editors@macroaxis.com
