B. Riley: Time To Buy TransAct Technologies

• TransAct Technologies Incorporated TACT shares have risen 35 percent since July 14, having risen from below $8 to above $10.
• B. Riley’s Kara Anderson initiated coverage of the company with a Buy rating and a price target of $12.50.
• TransAct’s new products have a substantial market opportunity and the company’s sales efforts could reap good results over time, Anderson noted.

TransAct Technologies designs, develops, and markets technology solutions to sectors with printing and software needs. Analyst Kara Anderson said that the company has recently shifted its “strategic focus” from the lower-margin printing markets to industries that have growth prospects and need high-value products.

“We believe the market opportunity for TransAct’s new products is large and expect its accelerated sales efforts to begin to pay off both in the near and long term,” Anderson wrote.

TransAct’s balance sheet has had zero debt over the last decade. The company’s cash flows are growing and it has returned almost the entire $5.4 million in free cash flow to shareholders by buying back common stock and cash dividends during 2014.

In the report B. Riley noted, “The company pays an $0.08 quarterly dividend, representing an annual dividend yield of 3.2%. We believe management can continue to return capital to shareholders even as it invests to support sales growth.”

TransAct has made steady progress in its turnaround, which has generated revenue growth in key product lines and robust adjusted EBITDA gains in 2015 to date. “We expect the company will continue to execute on its sales initiatives for the remainder of the year,” Anderson said.

B. Riley expects TransAct to record total revenue growth of 13.3 percent and double its adjusted EBITDA versus the previous year. Anderson added, “Looking forward, we see TransAct benefitting from greater traction in new and recent product launches, gross margin expansion, and operating leverage.”