Iteris Is Ripe for a Breakout
Big data is the future, whether it’s in the applications software area or—in the case of Iteris Inc (NASDAQ:ITI)—in the specialized data collection market.
Iteris is a micro-cap that traded an average of fewer than 200,000 shares daily over the past three months, but ITI stock has been spectacular on the chart.
On a year-to-date basis, Iteris has appreciated a whopping 97%, including a healthy 33% advance over the past month, easily outperforming the S&P 500 and the NASDAQ.
Since trading at a record $8.17 on October 12, ITI stock has retrenched about 15% and could be heading lower, which would open up an aggressive buying opportunity.
The company doesn’t develop software or hardware, but it uses technology to collect a multitude of big data and turns this information into critical analysis that is employed by clients for traffic and agriculture solutions.
Data aggregated by Iteris includes data on traffic, roads, weather, water, soil, and crops.
The applications for the data are broad, and are used for making critical decisions.
My Fundamental Bull Case for ITI Stock
Iteris has steadily grown its revenues in three straight fiscal years (ending in March). Revenues increased from $68.2 million in FY14 to more than $95.9 million in FY17.
The company ramped up its revenue growth rate to 23.5% in FY17, compared to 7.1% in FY16.
Gross margins have held at around 39% for three straight years as Iteris moves toward profitability in FY19.
Looking ahead to FY18, Iteris is expected to see revenue growth settle back down to 7.4% (to $103.1 million), prior to a rally to 13.2% (to $116.7 million) in FY19. (Source: “Iteris, Inc. (ITI),” Yahoo! Finance, last accessed December 15, 2017.)
Iteris has yet to turn either a generally accepted accounting principles (GAAP) or adjusted profit but, based on the estimates, we could see profits of $0.03 to $0.06 per diluted share in FY19.
On the chart, ITI stock has been on a strong rally since the major breakout at around $2.75 in June 2016, followed by $4.00 in January 2017.
Iteris stock has managed to hold its 50-day moving average (MA), but it did break below in November, prior to attracting support at the 200-day MA.
Chart courtesy of StockCharts.com
ITI stock plunged to $5.30 in November in excess selling, but the sell-off was met by strong buying that resulted in two bullish upside gaps on the month.
Iteris will likely target another run at $8.00. A break and support above that price could provide the next bull leg up to the $10.00 level, representing a potential 44% attempt.