Wireless Telecom Group Inc. (WTT, Financial) is a microcap trading at near Net-Net levels. The definition of a Net-Net is when market capitalization exceeds NCAV (total current assets – total liabilities). The current price is $1.50 and NCAV (($26.26 million - $2.03 million) / 19.63 million shares outstanding) comes out to $1.23.
Company
Wireless Telecom Group was founded in New Jersey in 1985. It designs and manufactures radio frequency (RF) and microwave-based products for wireless and advanced communications industries. The company has three brands. The Boontoon brand manufactures test equipment dedicated to measuring RF and microwave systems power in telecommunication markets. Microlab/FXR (Microlab) sells products for commercial applications such as wireless base stations for cellular, paging and private communications, inside wireless signal distribution, TV transmitters, and flight navigation landing systems. Noisecom sells electronic noise generation equipment and noise sources to the commercial and military telecommunications fields. Products can be used by the military for jamming radio signals or for testing purposes.
The company has grown revenue steadily from $24.6 million to $40.3 million during the 2010 to 2014 period with a CAGR of 13%.
Net income has been much more flat. In 2014, net income dropped to $2.42 million from $3.84 million in 2013. The result was mainly influenced by a big tax swing and not because of operational issues. In 2013, they got a tax refund while they had to pay a 47% tax rate in 2014.
Here’s a look at 2014 revenue and net income by operating segment. You can see that the company’s Network Solutions segment drives the company’s fortunes.
| Segment | 2014 Rev | % of Rev |
| Network Solutions | 28,211,609 | 69.9% |
| Test and Measurement | 12,125,759 | 30.1% |
| Total | $ 40,337,368 | 100.0% |
| Segment | 2014 Income | % of Income |
| Network Solutions | 7,555,578 | 87.4% |
| Test and Measurement | 1,085,357 | 12.6% |
| Total | $8,640,935 | 100.0% |
Per the latest 10Q:
For the three months ended June 30, as compared to the corresponding period of the previous year, net consolidated sales decreased to approximately $8,213,000 from approximately $10,439,000, a decrease of 21.3%. Such decreases were primarily the result of continued softness in demand for the company’s network solutions products due to reductions in customer capital spending. While sales to wireless operators have decreased in the first half of 2015 and may continue to fluctuate in the short term, the company expects long term demand for its network solutions products to improve due to the continuing worldwide expansion of broadband coverage.
Final Thoughts
Wireless Telecom generates the majority of its revenues and earnings from its Networks Solutions segment and is impacted by the capital spending for data and communications networks. Specifically, revenues are dependent in part on commercial upgrades of 4G wireless communications equipment, products and services. The company has no debt and is trading at a trailing 12 month price to book ratio of 0.87. TTM PE ratio is 19.85, EV / EBIT is 6.57, and as previously mentioned it’s trading close to its NCAV. The stock has potential because of its strong balance sheet. However, I don’t see any reason to rush in. Investors looking for a bargain should put it on the watchlist and pay attention to results in the next couple of quarters to see if the networking segment stabilizes. People interested in this stock should recognize that it's a microcap with low trading volumes. If you trade, limit orders are highly recommended.
