The stock is down 87% in the last 6 months. But the low p/e and RSI shouldn’t be reassuring. Interesting it is nevertheless..
Some factoids:
- The Company, David J. Stern Processing (DJSP) is a split off from Stern’s law-firm and does the processing for the mortgage and real estate industry (they’re concentrated in Florida and are one of the largest). There is much ado about this processing in general.
- So no surprise that the company stock was at almost $14 a share as late ago as April (last Friday, the 15th of Oct. it closed at $1.51)
- But the latest quarter, Q2 was still profitable and over the Q1+2 it was still generating cash from operations
- They are looking to using technology to increase productivity and also want to diversify beyond default services
- Curiously, the short count per 30 Sept is a very modest 507K (on a float of 15.67M and 23.73M shares outstanding)
- The 64,000 dollar question is how the recent foreclosure mess is going to impact them. From the share price action, one is inclined to argue that disaster is already priced in to a significant degree
- This is what they themselves say, they’ve reduced staff and have an audit committee to see whether they’re complying with all legal obligations
- And than there might be a lawsuit
- Here is some history from an optimist
- And another one
- Some of their colleagues are even worse off
- And this might hit CEO David Stern (albeit his lawfirm, rather than the split-off DJSP company)
So basically, they’re on the ropes. There are way too many loose ends to jump in now (unless you are a reckless gambler with a death wish), but we’re inclined to say that in principle, there is enough business for them to survive (and even make a decent living). But much of that seem to depend on whether they can weather the present near perfect storm. They have $6M in cash and $109M in debt, not terribly reassuring either (although they pay a modest 2.8% interest on the debt). At the minimum, we would wait until that audit committee has a verdict on their legal compliance. That seems by far the most important issue right now.
