Neonode: Subtle Technologies, Weak Business (NASDAQ:NEON)

Overview

Neonode Inc. (NASDAQ:NEON) is a microcap engineering company that mostly sells two merchandise, a person of them hardware and the other application. The very first of these is an optical sensing engineering for consumer equipment known as zForce. zForce normally takes the sort of a touch-no cost display screen for the units that it is built-in into. It is at the moment deployed across health-related, automotive, and customer verticals.

The computer software facet of the property right here is referred to as MultiSensing. MultiSensing is a established of algorithms for equipment perception and graphic processing. Primarily this permits desktops to process what is going on in a streaming video clip context. A use circumstance cited by the corporation is identifying whether a vehicle is occupied or not by a movie feed, though there are undoubtedly many other people.

Off the bat we can see that this is a one of a kind engineering business that has a keep track of record of innovation. I have not nevertheless encountered an additional entity promoting this certain blend of goods, and am not familiar with one more business that is capable to offer you contact-absolutely free touchscreens. The company states that it has more than 100 patents and is deployed throughout extra than 85M devices globally. They also run throughout many verticals, as would be predicted of a organization advertising what is a comparatively foundational engineering this sort of as this a person. While the engineering right here is undoubtedly intriguing, it is actually the financials that depend for us traders – this is what we will critique in this report.

Financials

Neonode is not much too incredibly hot when it arrives to revenues. Around the previous 10 years, they have not been capable to set up a steady baseline to earnings. Though reaching $11.1M for fiscal 12 months 2015, the organization subsequently noticed its revenues decrease each individual calendar year since. This is a bad exhibiting.

Web cash flow isn’t going to search a lot greater Neonode has not been lucrative for a solitary 12 months of the previous 10. Even though the reduction may well have shrunk considerably, do don’t forget that revenues have as very well all over this time period.

Getting witnessed the profitability picture, we can glimpse to the stability sheet. Below matters are not also worrisome. The corporation has only $259K of whole credit card debt and has continuously preserved much more assets than liabilities. It also has a properly favourable reserve worth per share, although this range is not an extremely significant portion of its share value at 19.3%. The worker line item displays us how miniscule this corporation actually is: it only has 45 entire-time employees. Frankly I uncover it amazing that they had been ready to acquire this sort of complex technological innovation with this kind of a small workforce. It is also evident, nevertheless, that they are sorely missing on the small business front and have not been able to reach development.

This organization also regularly loses dollars. Just like net income, it has constantly carried out so just about every calendar year for the previous decade. This is the nail in the coffin for the financial image close to this inventory.

Together with these flailing financials, Neonode is buying and selling at a pretty high-priced valuation relative to its revenues as well as its e-book price tag.

There will not look to be a explanation to order this stock. The only probable extensive-phrase vivid place that I can garner is that the organization appointed a new CEO in 2020. It is possible that he may possibly steer the ship into new waters, whilst I positive haven’t found any evidence of that yet.

Conclusion

Neonode is an instance of a firm with chopping-edge technology that just will not do a fantastic task of providing it. This may be frequent in Silicon Valley, but I believe us general public market place investors have a better bar for business general performance. Whilst I imagine their intellectual property and R&D functionality have serious price, the agency hasn’t finished a superior work of bringing it to industry. The new CEO has also not demonstrated the ability to do that as of just nonetheless. It does not very make perception to me why this company trades at the multiples that it does, and I won’t speculate as to the circumstance. Even so I want to make it apparent that buyers really should not purchase this inventory at this time.

When I would commonly phone a tough sell ranking on a inventory with these sorts of financials about this sort of a extended timeframe, I will hold off below. This is owing to the evidently advanced technology and high quality intellectual property that they have I also feel their optical sensing technology has a pretty huge addressable marketplace that will proceed to be buoyant. Article-pandemic we have only additional need for touch-free laptop or computer/human conversation. If this firm can one day harness its mental assets into small business outcomes, items can get interesting. Maybe a personal equity organization will even choose it personal and shake items up, but I would not hold my breath. Barring an eventuality of that nature I wouldn’t get this stock. It is really a keep at greatest.