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Wednesday, August 19, 2009

Interactive Intelligence - a smart investment?

Looking for a tech stock with a strong BUY rating?

Tuesay night Alert HQ identified a small cap stock that appears poised for a quick gain. Interactive Intelligence (ININ) appeared as a Strong BUY on our list of Swing Trading Signals. The chart follows:

Note how the stock barely touched its 50-day moving average on an intra-day basis and is now bouncing up off its lower Bollinger Band. You can see the strong reaction of the Williams %R indicator as it moves steeply up from an over-sold value. In addition, that 50-day MA is heading nicely upward while the stock has already regained its 20-day MA.

So technically the stock was a good trade today, gaining 3.86%, and showing a potential for a good 5% or 6% more over the next few days and perhaps more over the longer term as long as the overall market doesn't plunge.

What about the fundamentals?

Interactive Intelligence is a small cap stock that is involved in IP telephony. The buzz word best describing the company's business is "unified communication." This is something that Cisco Systems, for example, is also pursuing. Essentially, it means an integration of real-time communication services such as instant messaging (chat), presence information, IP telephony, video conferencing, call control and speech control with non real-time communication services such as unified messaging (integrated voicemail, e-mail, SMS and fax). Interactive Intelligence packages these services for small and mid-sized businesses.

The most recent quarter's results were reasonably good with revenues increasing 7.5% y-o-y and EPS of $0.12 versus only $0.04 in the year ago quarter. The following chart provides a snapshot of the income statement:

Explore more ININ Data on Wikinvest

And this next chart shows that the company is doing very well with respect to cash flow lately:

Explore more ININ Data on Wikinvest

It is noteworthy that the company was able to show growth in the current difficult economic environment; however, this is by no means a cheap company. As an investor you are going to have to pay for the growth this company may offer. It has a sky-high trailing PE of 53, a forward PE of 20 (not too bad), a PEG of 1.28 (kind of high for a value investor), price-to-sales of nearly 2.25 and price-to-book over 5.

Nevertheless, with these kinds of stocks growth is the name of the game and Interactive Intelligence just might be able to deliver.

Disclosure: no position

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