New Recommendation–ILOG SA (NASDAQ ILOG)

ILOG SA (NASDAQ–ILOG)
Valuation-$20.52
Closing price March 23, 2007-$13.60

Yes, this is a French Company. As usual we have been watching this one for a while. We bought some at this level a few weeks back, just to see it drop into the mid-$12 level right after we bought it. Now it has come back with the overall market rebound. This is as “thin” as they get, but you can buy it if you are patient. As with most “thin” stocks they don’t trade a lot, and then, something happens and they do. We hesitated on recommending another OB stock about the same time we were looking at ILOG because it only traded about 15,000 shares a day. Then it traded over 1 million shares one day and jumped 24%, so we decided to go ahead with ILOG.

ILOG released Q2 results (12/31/2007) on January 25th. Sales were up 27% and they made $.05 net income per share (fully taxed) compared to a loss of $.01 the prior year. They have $3.41 per share in cash, 77% gross margins and are trading at 66% of our valuation. This is at the high end of where we like to recommend our “cheap stocks”, however, this looks more like a growth stock to us. We expect that ILOG’s valuation will increase over the next year and the stock price will too.

ILOG is predicting at least 17% sales growth over fiscal 2006 which should put them in the $155-$160 million sales range for this year (6/30/2007) and increased net income. They made $.35 per share last year, but this was not fully taxed.

There are about 18.6 million fully diluted shares outstanding. ILOG did 50% of its 6/30/2006 revenue in the U.S., 40% in Europe and 10% in Asia/Pacific.

In February, ILOG announced a small acquisition in Chicago, that is expected to close in April. This will help sales growth, increase their U.S. business and only costs $15 million in cash. No details on the sales or profitability of the acquisition have been disclosed yet.

About ILOG

ILOG delivers software and services that empower customers to make better decisions faster and manage change and complexity. Over 2,500 corporations and more than 465 leading software vendors rely on ILOG’s market-leading business rule management system (BRMS), optimization and visualization software components, to achieve dramatic returns on investment, create market-defining products and services, and sharpen their competitive edge. ILOG was founded in 1987 and employs more than 775 people worldwide.

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