By: Tomas Ronolski - AllPennyStocks.com News

Thursday, August 11, 2016

Equities are up in trading today, however, concerns over high valuations continue. The S&P 500 continues to trade near record high levels but based on the recent earnings season, current valuations do not look justified. According to data provider FactSet, for the second quarter of 2016, the blended earnings decline for S&P 500 companies was -3.5%. This was after 86% of the companies had reported their earnings. Looking ahead, the outlook is not promising either. Analysts expect another negative year-over-year earnings growth in the third quarter. That would make it the sixth successive quarter of earnings decline for the S&P 500.

While the earnings do not justify current valuations, market sentiment remains bullish due to money printing from developed world central banks. With the exception of the Federal Reserve in the U.S., all the major developed world central banks are pursuing expansionary monetary policy. Even the Fed is not tightening but rather holding on to rates.

While the ongoing earnings season has been a disappointment, there are some companies that have reported strong results. One such company is Route1 Inc. (TSX-Venture:ROI). Based in Toronto, Canada, Route1 is a provider of security and identity management solutions to corporations and government agencies that need access to various digital resources and sensitive data.

Route1 reported its financial results for the second quarter ended June 30, 2016. For the quarter, ROI reported total revenue of $1.81 million, compared to $1.62 million reported for the same period in the previous year. The company’s gross profit for the quarter totaled $1.47 million, compared to $1.33 million reported for the same period in the previous year.

During the second quarter of 2016, the company realized growth in revenue from MobiKEY application software subscribers (recurring revenue). Revenue from Services includes MobiKEY application software, the MobiNET (DEFIMNET) platform and other appliance licensing or yearly maintenance. The net increase in MobiKEY application software subscribers primarily came from agencies and components within the U.S. Department of Defense and the U.S. Navy.

ROI’s EBITDA for the second quarter came in at $278,000, compared to $227,000 reported for the same period in the previous year. Operating profit for the quarter was $172,000, compared to $128,000 reported for the same period in the previous year.

At last check, Route1 shares were even on the day at $0.045 on volume of 310,000, which is more than double the daily average volume of 139,630. Shares of ROI have been range bound between $0.06 on the high end and $0.04 on the low end over the last 52 weeks as investors wait for a catalyst to push shares higher. Today’s results, although improved, do not look like enough incentive to get shareholders excited in the short term.

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