BUY Recommendation-DAEG-$1.20

Daegis Inc. (NASDAQ–DAEG)

Valuation-$4.00
Price November 30, 2012-$1.20

We have watched DAEG for a few years now. Their performance and debt pay down have finally moved this into the BUY category for us.

They released earnings yesterday also. Sales fell from $11.1 million to $10.3 million but they made $252,000 or $.01 per share compared to $795,000 or $.05 per share. Not stellar we know but it makes two profitable quarters in a row. Also, debt has been paid down by about $2.7 million since April. Net cash is negative $14.5 million or negative $.98 per share. This is down from negative $22.8 million at January 31, 2011.

Gross margins are about 66% and from their press release: “During the first two quarters of the fiscal year, we rebuilt the eDiscovery executive team, significantly enhanced our cloud-based eDiscovery Platform, and added experienced sales professionals. We delivered a major new release of the Daegis eDiscovery Platform with enhanced self-service usability and our innovative technology assisted review solution known as Acumen. In addition, we right sized our cost structure to deliver profitability as we implement our plans to grow. We are extremely focused on execution and expect to see improved results in the second half of the year. In our database, archive and migration business segment, we saw stronger than anticipated performance with 14% growth quarter over quarter and 13% sequentially. We launched a major release of our AXS-One archive product, achieved significant archive and migration wins, and continued our trend of strong maintenance renewals.”

Sounds like some good things to come.

There are about 14.7 million shares outstanding but it only trades about 10,000 shares a day so patient buying is needed.

About Daegis:
Daegis delivers eDiscovery and information management solutions. Daegis’ eDiscovery Platform combines technology and on-demand services to deliver end-to-end and cost-effective solutions for corporations and law firms. The Company’s information management business delivers solutions for developing, managing, modernizing, and archiving applications and business data.

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