Starlims: The Ever-Changing Story

Back in August 2007, fellow IOI colleague Zack Miller posted about a newly IPO’d Israeli company called Starlims Technologies (LIMS). The company competes in the Laboratory Information Management Systems market and has over 20 years experience marketing in this space. Its software “manages the collection, processing, storage, retrieval and analysis of information generated in laboratories.”

Almost prophetically, Miller nailed it:

…They report on August 13th. I’d wait on the sidelines as the company gets its publicly-traded legs and gets used to reporting to the Street. As the smoke settles, this might be an interesting play for small-cap investors looking at some of the best of Israeli technologies.

How right he was. The company had a few rough quarters sending the stock tumbling by more than 50%.

With the earnings stumbles, our view was that the dust still had to settle. On Monday, Invest2Success had a real interesting piece on the company. Michael Michaud has the stock as his stock pick of the week.

He wrote:

This stock only has an 18% institutional ownership currently. It’s also a small cap, so be careful, don’t put your entire account equity in this stock just in case the price tanks after you get into it. On the other hand, this company has the potential to grow big and fast being this small at a $65M market cap.

Commenting on earnings he said:

Total revenue for the first quarter of 2008 was $7.0 million, up 28.9% from $5.4 million reported in the first quarter of 2007. Product revenues were $4.7 million, up 36.8% from $3.4 million reported in the same period a year ago. Services revenues were $2.3 million, up 15.4% from $2.0 million reported in the same period a year ago.

With their P/E at a reasonable 13, I see Starlims with very good growth potential going forward.

We still aren’t ready to go out on a limb (sorry!) for this one, but the story seems to be changing. Investors looking for a beaten up micro-cap Israeli hi-tech play should take a long look at the Invest2Success blog - it’s an interesting analysis.

Disclosure: The author’s fund has no position in any stock mentioned as of June 2, 2008.