ISSC - A cash cow that we bring back home

ISSC - a company develops and manufactures cockpit related equipment, including flat panel display, flight information and monitoring systems, etc.

At market cap of $254M, this company has a total of $82M in cash, with virtually no debt. Though the company didn't demonstrate a continuously steady growth pattern, it manages to maintain an average annual revenue growth of 40% in 2004 and 2005. A remarkable phenomenon along with that is, during last 5 years, irregardless of growth and market condition, the company successfully drived the profitablity up year over year. Operating margin is improved from 30% (in 2000) to 43% (in 2005), while ROE from 13.5% to 21.5%(above numbers quoted from MorningStar) which showcased the management efficiency.

The company is currently under 2 million shares purchase program, to be expired June 2006. Also stated in 4Q2005 Quarterly Report, its net sales is decreased from $19M in 4Q 2004 to $5.8M in 4Q 2005, due to an increased demand as a result of regulatory requirement in 4Q2004. Its 1Q2006 backlog grew by 5.3million or 40% compared to 4Q2005. According to the news in their website, since the publication of the quarterly report, they acquired another 4.7 million orders.

Conservatively, if the company keeps $50M net sales, and generate 15M net earnings in 2006 (assume same profitbility level), at $14/share, it is valued at 19 times forward P/E.

Backlog is its biggest risk, an insufficient backlog will bring fatal damage to its quarterly report, though with so much cash in hand, it doesn't expose fatal and immient risks.

Closely watch its backlog and revenue, and if the revenue could go up, its stock potential is unlimited, as I don't have doubt on firm's ability to turn revenue to profit.

I currently own ISSC shares.