Anaheim’s Datum Inc. Seen as Good Buy

Looking for an interesting company in which to invest? The editors of the California Technology Stock Letter say Datum Inc. not only is interesting but is also a good buy at around $6 a share.

The Anaheim concern is one of a handful of companies across the United States that manufacture precision time-and-frequency-measuring equipment used in missile tracking, navigation and space exploration.

“Datum is a little three-ring circus, providing some of the brains for an awful lot of whizzing projectiles,” said Mike Murphy, the Technology Stock Letter’s editor.

Indeed, Datum manufactures instruments used in pilotless aircraft similar to those employed during the 1982 Israeli invasion of Lebanon. By jamming Syrian radars, the drones rendered SAM missile batteries defenseless against Israeli bombers.

Datum’s gear was not on the Israeli craft--in fact, Ben Traver, Datum’s chief financial officer, says the Israelis are among the biggest competitors in that area--but the company is supplying instruments for the pilotless craft now being used by the U.S. Air Force and the U.S. Army.

Fully 75% of Datum’s sales revenue comes from the military and from government contractors, primarily in the defense industry. The company’s non-military products include atomic clocks and instruments used in navigational and communications satellites.

Earnings Estimates

Datum’s 1986 earnings should total 31 cents a share, or about $843,000, Murphy estimates. The earnings will be down when compared to the 33 cents a share, or $976,000, that Datum earned in 1985, but profits should rebound this year, Murphy said. For 1987, he predicts, Datum will earn 40 cents a share, or about $1.1 million.

Traver said Friday that Datum is “comfortable” with Murphy’s estimates and hopes “to do a little bit better.” The 1986 results, he said, will be released in about two weeks.

Although earnings have been weak--primarily because of slow sales at its Massachusetts-based Frequency and Time Systems subsidiary--Datum is financially healthy with about $1 a share in cash and virtually no long-term debt.

Murphy does warn that Datum’s revenues have been flat for the last two years “and could flatten out again.” Moreover, because the company is heavily involved with defense and space projects, it could be vulnerable to spending cuts, he adds.

Risk Seen Minimal

But because Datum is trading near its book value of $5.11 a share, Murphy believes that the downside risk for investors is minimal. Traded over the counter, Datum closed Friday at $6 a share. The potential, Murphy said, could be as much as $9 a share--and it might not take long for the stock price to get there.

“Sometime between the time they announce the December quarter’s earnings and the time they announce the March quarter, we expect the stock to adjust to $8 to $9 a share,” Murphy said in an interview Friday.

Isaac Hubermann, an analyst with the Dallas investment firm of Preston Securities, says investors should buy Datum “on weakness,” at around $5 a share. Although the stock dipped to the $4.25 a share range in December on tax-loss selling, Hubermann believes the risk to buyers is fairly small.

And, like Murphy, Hubermann said he believes that the stock could be a big winner, particularly if Datum can boost performance at its Frequency and Time Systems subsidiary. If that happens, the stock could “maybe even move into the $10- to $15-a-share range,” he said.