Audinate’s Share Price Down Despite 90% increase on One-Year Return

Global provider of audio networking technologies Audinate Group Ltd [ASX:AD8] is currently sporting a one-year return of 91.59%.

Despite this Audinate’s share price is trading at $5.97, down 5.98%.

Their digital audio distribution platform, Dante, has enabled an improved sound quality in standard audio equipment when the product is installed.

The key to the company’s success is the way that their products allow audio signals to be carried over a computer network rather than analogue cables, meaning there is no need to run any cables through buildings or venues.

Dante is considered ‘the preferred audio networking solution that has been adopted by more pro-audio AV manufacturers than any other networking technology.’ Thus their high year-on-year return is well-earned.

And today’s update from the company makes it appear as though Audinate won’t be slowing down any time soon.

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Audinate continues its growth trajectory

As per the update, reported cash collections for the company in 3Q FY19 are up 40%, thanks to ‘ongoing growth in the core business, supplemented by new products’. Unaudited revenue is also up with strong sales during the month of March.

Much of this revenue was sourced from Dante enabled products, such as speakers and sound mixers, which are providing higher quality sound systems to everyday consumers.

This quarter also saw Audinate receive their research and development tax incentive for FY18. The company was given a $1.3 million tax rebate from development activities conducted last financial year.

As of 31 March, operating cash flow is sitting at $2.2 million, a 42% increase since that time last year. Cash outflow for Q3 reached $1.5 million, but this is ‘reflecting the investment in Dante AV video products about to come to market’.

Audinate goes visual

Yes, that’s right, Audinate is now branching into video solutions, known as Dante AV. This product will enable HDMI video to be distributed and synchronised over an IT network — a highly appealing product in this emerging wave of tech-based communication.

Audinate CEO Lee Ellison said of the company:

The business is tracking to plan…Audinate has historically delivered annual revenue growth in US Dollar terms of between 26% and 31%, and we see similar top-line growth being generated in FY19.

Strategically, Audinate seem to be heading in the right direction. But ultimately, future success is heavily reliant on the Dante solution expanding its reach.

Indeed, the company itself added a disclaimer at the end of the update, saying their future performance can be affected by ‘risks, uncertainties and other factors, many of which are beyond the control of Audinate.’

And with a market cap of just $364 million, the usual volatility in any small-cap stock is something you must also keep in mind when choosing to invest.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

PS: If you are looking to add some small-cap plays to your investment portfolio, but aren’t yet convinced of Audinate, then check out this free report on ‘Three Small-Cap Stocks to Own Right Now’. Download now to see expert analyst Same Volkering’s top picks in the small-cap world.


Ryan Clarkson-Ledward is one of Money Morning’s junior analysts. Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects. Ryan’s primary focus is assisting Sam Volkering with background research and insight for readers by dissecting the latest events affecting the world. Working closely with Sam, they explore the latest in small-cap and technology stocks as well as cryptocurrency opportunities. You can find Ryan’s contributing research, developments, and supporting information across several e-letters, including:


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