One Stop Systems Inc: Why AI May Power a Double in OSS Stock

One Stop Systems Inc: Why AI May Power a Double in OSS Stock
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One Stop Systems Inc’s Pathway to Profits Could Mean Big Returns for Investors

For speculators looking for stocks with big risk/reward prospects, they often have to search the really small companies with market caps below $50.0 million.

Of course, the risk associated with nano-cap companies is high, so you may want to turn away at this time if you are afraid of risk. If not, then take a look at One Stop Systems Inc (NASDAQ:OSS), which has a market cap of a mere $36.9 million.

OSS stock is trading below the mid-point of its 52-week range of $1.35 to $3.90. It’s down 15.5% over the past year but has rallied by 27.6% over the last three months.

As I mentioned, One Stop Systems stock is not for those who wince when there’s a small decline. This stock is risky, but the potential reward is high.

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One Stop Systems Inc puts together advanced high-performance computers to be used for applications demanding lots of computing power.

The company’s computers are ideal for applications that involve artificial intelligence (AI), deep learning, finance technology, media and entertainment; oil and gas; research; and security and defense.

The sell-off in OSS stock looks extreme, given that the company has reported strong revenue growth and is moving toward adjusted profits.

Don’t worry about trading liquidity, as One Stop Systems stock traded by a daily average of around 145,820 shares during the past three months.

A glance at the price chart shows OSS stock breaking down from the $3.30 level, but note the bullish golden cross pattern.

Chart courtesy of StockCharts.com

There is resistance just south of $3.00 to be tested. If One Stop Systems stock can take out $3.00, we could see a move toward $4.00 and $5.00.

Why There’s a Bull Case for OSS Stock 

For such a small company, One Stop Systems Inc has good fundamentals.

Its revenues increased in each of the last three years, nearly tripling from 2015 to 2018. The compound annual growth rate (CAGR) during this time frame was 37.6%.

Fiscal Year Revenues (Millions) Growth
2015 $14.2
2016 $18.9 32.7%
2017 $27.5 45.9%
2018 $37.0 34.5%

(Source: “One Stop Systems,” MarketWatch, last accessed November 8, 2019.)

One Stop Systems is expected to continue its revenue growth. For 2019, its revenues are estimated to surge by 51.9% to $56.2 million before moderating to  growth of 15.8% to $65.1 million in 2020. (Source: “One Stop Systems, Inc. (OSS),”Yahoo! Finance, last accessed November 8, 2019.)

The company has also managed to generate positive earnings before interest taxes, depreciation, and amortization (EBITDA) from 2015 to 2018.

Fiscal Year EBITDA Growth
2015 $352,060
2016 $217,180 -38.3%
2017 $386,830 78.1%
2018 -$2.1 million -650.1%

(Source: MarketWatch, op. cit.)

One Stop Systems Inc recorded generally accepted accounting principles (GAAP) earnings per share (EPS) in 2015 and 2017.

Fiscal Year GAAP Diluted EPS Growth
2015 $0.00
2016 -$0.01 -1,246.2%
2017 $0.01 152.4%
2018 -$0.09 -1,257.7%

(Source: MarketWatch, op. cit.)

On an adjusted basis, One Stop Systems earned $0.10 per diluted share in 2018 but is expected to lose $0.12 per diluted share in 2019. Things appear to be improving for 2020, with OSS expected to earn $0.08 per diluted share. (Source: Yahoo! Finance, op. cit.)

Analyst Take

One Stop Systems Inc’s ability to ramp up revenues is bullish. Add the expected move back to profitability and you have a stock that can easily double if the company can deliver and surprise on its earnings.

The risk is obviously the small size of the company that makes One Stop Systems vulnerable to operational issues. But for risk capital traders, OSS stock is worth a look.