OPBL is my top pick for 2007.
Normally I would avoid a stock that has risen over 500% in the past 5 months, however Optionable is in the midst of a dramatic growth phase and will likely start trading on the Nasdaq or AMEX later this year, so a higher valuation seems justified. Based on the current price of $3.77 and EPS of $0.042 in Q3, the annualized trailing PE is 22. Already the stock has become an OTCBB ‘darling’. Sector peers like NMX, CME and ICE trade at PE’s in the 50 to 100+ range, yet OPBL is growing much more rapidly.
Optionable provides natural gas futures trading services to a range of clients including brokerage firms, hedge funds and financial institutions. Trading is done both electronically on their OPEX platform and directly through the NYMEX. In November the company also began offering trading services for crude oil, heating oil and gasoline futures. This new initiative could greatly enhance their growth prospects.
Revenue and earnings growth has been dramatic over the past year, with net income up 270% on a 123% surge in revenues year over year through 9 months. EPS was $0.07 through 9 months, of which $0.042 was realized in the 3rd quarter, their seasonally strongest. Earnings are untaxed, however the company will likely deplete its operating loss carryforwards within the coming six months.
Fourth quarter growth in trading volumes has been phenomenal, with transaction volumes being reported by the company on a monthly basis. For December all-time record transaction volume was reported …. up an amazing 59% from November and 23% from the prior record month of October !
Clearly there are numerous risks to this stock ….. to some extent a higher valuation will depend on a Nasdaq or Amex listing which seems probable in 2007, but hardly certain. It’s also unclear to what degree the surge in transaction volume will translate into revenues and earnings growth. The company may be offering deep discounts to customers to attract new business. It’s also entirely possible that this incredible growth phase will taper off significantly in the coming months. Also 4th quarter earnings may be impacted by the large year end bonuses that are common to Wall Street firms. The company is also planning a move into NYC from the suburbs which will likely increase their expenses and may results in special charges. Furthermore, earnings will be fully taxed by later in 2007.
Nonetheless, the stock valuation remains quite reasonable give the recent dramatic growth and ‘glamour’ appeal of the commodity futures trading sector. The company’s recent expansion into crude oil, heating oil and gasoline futures trading services could be the catalyst for continued strong growth. If their compelling growth story remains intact and the company can get a Nasdaq listing, then the stock could be trading at $10+ by year end 2007.
