The Tiny Tech Stock Is About to Go Vertical

RADCOMRADCOM Is on a Path to a Breakout

Israel is widely considered the Silicon Valley of the Middle East, characterized by hundreds of listings on the NASDAQ. In the small-cap technology segment, a company that is beginning to display strong growth metrics is Israel-based RADCOM Ltd. (NASDAQ:RDCM).

RDCM stock is not widely known in the U.S. but the provider of assurance and Customer Experience Management (CEM) solutions has clients in 25 countries worldwide.

These solutions are in high demand by Communications Service Providers to help deliver the best service on fixed and mobile networks.

RADCOM has been in rally mode on rising optimism about improved revenue and earnings growth over the next two years.

Shares of RDCM stock have made a strong move from the 52-week low of $11.16, delivering a return of 12% this year and 70% over the past year.

While the upside rally has rewarded traders so far, my analysis shows there are more gains to come as RADCOM turns around its operations marked by growth.

Fundamental and Technical Picture Points to Higher RDCM Stock Prices

Fundamentally, RADCOM experienced several years of anemic results with revenues declining to $18.67 million in 2015 compared to $23.63 million in 2014.

The company’s prospects appear to be improving after RADCOM delivered revenue growth of 58% to $29.51 million in 2016, with the positive trend set to continue.

RADCOM Revenues
2013 $20.48 Million
2014 $23.64 Million
2015 $18.67 Million
2016 $29.51 Million
2017 $38.50 Million (Estimate)
2018 $49.12 Million (Estimate)

(Source: “Radcom Ltd. (RDCM),” Yahoo! Finance, last accessed June 9, 2017.)

The estimated revenue growth of 30.50% and 27.60% for RADCOM in 2017 and 2018 is off the growth rate in 2016, but is encouraging given the past inconsistencies.

The reality is that as smaller companies like RADCOM begin to grow their revenue base, the rate of growth will tend to normalize at a lower level going forward, which is what is happening here.

As far as the bottom line is concerned, RADCOM has been inconsistent, which is often the case with small-cap growth companies.

One positive sign is that the company is now profitable and will just need to deliver consistent year-over-year earnings momentum to drive the RDCM stock price higher.

RADCOM reported profits of $0.07 per diluted share in 2015 followed by a surge to $0.44 per diluted share in 2016.

Earnings are slated to decline to $0.26 per diluted share this year but rally to $0.53 per diluted share in 2018 with a high estimate of $0.60 per diluted share. (Source: Ibid.)

On a quarterly basis, RADCOM has delivered some impressive results, averaging a 188% beat on the consensus earnings-per-share (EPS) in three of the last four quarters.

The improving fundamentals are reflected in the strong technical picture painted on the RADCOM stock chart.

RDCM stock staged several upside breaks over the past two years, including a potential upcoming test at $21.00-$22.00 resistance, the high point since February 2005.

RDCM stock chart

Chart courtesy of StockCharts.com

The RADCOM stock chart is showing a bullish golden cross, an indication of more upside moves on the horizon.

RADCOM stock chart

Chart courtesy of StockCharts.com

I doubt RDCM stock could recover the euphoria in early 2000 when the shares were trading at crazy valuations at over $80.00 a share, but more gains are coming.