Is Creative Realities a Buy Under $1?
Creative Realities’ (CREX) shares have tumbled nearly 41.1% in price over the past three months, due primarily to the broader market sell-off since the start of the year. While the...
Creative Realities' (CREX) shares have tumbled nearly 41.1% in price over the past three months, due primarily to the broader market sell-off since the start of the year. While the company has been taking various steps to boost its operational efficiency and growth, its negative profit margins could concern investors. So, is it worth betting on the stock at its current price level? Let's discuss.
Creative Realities Inc. (CREX) in Louisville, Ky., creates, develops, and implements digital signage experiences for enterprise-level networks and offers ongoing SaaS and support services in various vertical markets. It assists companies in using location-based digital media to accomplish business goals, such as higher revenue, improved customer experiences, and increased efficiency.
The stock is down 55.1% in price over the past year and 25.3% over the past month to close yesterday's trading session at $0.82. In addition, it is currently trading 77.2% below its 52-week high of $3.59.
CREX recently announced an $11 million private placement to fund its merger with Reflect Systems Inc., which might dilute the stock and hurt the company's existing shareholders. Furthermore, its poor profitability makes its near-term prospects look uncertain.
Here is what could shape CREX's performance in the near term:
In February, CREX agreed with a U.S. institutional investor for a private placement of 1,315,000 shares of common stock together with warrants to purchase up to 1,315,000 shares of common stock and 5,851,505 pre-funded warrants, with each pre-funded warrant exercisable for one share of common stock and common warrants. The company expects to use the proceeds from the private placement to pay a part of the cash component of the merger consideration due to stockholders of Reflect Systems, Inc. upon the completion of the acquisition.
CREX's 45.3% trailing-12-months gross profit margin is 10.8% lower than its 50.8% industry average. Also, CREX's levered FCF margin, EBITDA margin and ROC are negative 0.97%, 6.6%, and 10.3%, respectively. And its $471,000 trailing-12-month cash from operations is 99.8% lower than its $299.40 million industry average.
In terms of trailing-12-months Price/Sales, the stock is currently trading at 0.54x, which is 67.1% lower than the 1.65x industry average. Also, its 1.01x trailing-12-months EV/Sales is 59.8% lower than the 2.52x industry average. Furthermore, CREX's 1.17x trailing-12-months Price/Book is 44.6% lower than the 2.12x industry average.
POWR Ratings Reflect Uncertainty
CREX has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CREX has an F grade for Stability. The stock's 3.62 beta is consistent with the Stability grade.
Among the 147 stocks in the D-rated Software – Application industry, CREX is ranked #45.
Beyond what I have stated above, you can view CREX ratings for Quality, Growth, Momentum, Value, and Sentiment here.
While CREX's increasing investments across business segments should bolster its long-term prospects, the company's lack of profitability could concern investors. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $1.12 and $1.49, respectively, indicating bearish sentiment. So, we believe investors should wait for its prospects to stabilize before scooping up the shares.
How Does Creative Realities Inc. (CREX) Stack Up Against its Peers?
While CREX has an overall C rating, one might want to consider its industry peers, Commvault Systems Inc. (CVLT), Rimini Street Inc. (RMNI), and Progress Software Corporation (PRGS) which have an overall A (Strong Buy) rating.
What To Do Next?
If you would like to see more top stocks under $10, then you should check out our free special report:
What gives these stocks the right stuff to become big winners?
First, because they are all low-priced companies with explosive growth potential, that excel in key areas of growth, sentiment and momentum.
But even more important is that they are all top Buy rated stocks according to our coveted POWR Ratings system, Yes, that same system where top-rated stocks have averaged a +31.10% annual return.
Click below now to see these 3 exciting stocks which could double (or more!) in the year ahead:
CREX shares fell $0.82 (-100.00%) in premarket trading Friday. Year-to-date, CREX has declined -41.43%, versus a -4.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
Entrepreneur Editors' Picks
Formerly Enslaved Black Man Nearest Green Taught Jack Daniel Everything He Knew About Whiskey. Today, the Founder of Uncle Nearest Premium Whiskey Celebrates His Legacy.
Leadership Lessons From the Exclusive Creativity School That 'Packs 5 Years Learning Into 5 Days'
3 Expert-Backed Strategies for Staying Calm in Times of Confrontation
The CEO of Wayfair Has Helped Revolutionize Digital Shopping for 20 Years. Here's How He Handles Rocky Economic Conditions.
This Founder Went to Prison When He Was 15 Years Old. That's Where He Came Up With the Idea for a Company Now Backed By John Legend.
3 Signs You're Letting Pride Get in the Way of Being Successful
Chip and Joanna Gaines and Shonda Rhimes Found Incredible Success By Using This One Entrepreneurial Strategy. Here's How You Can Too.