GSE Systems

01/23/2015 7:00 am EST


Benj Gallander

President, Contra the Heard

Regarding his Top Pick last year, Benj Gallander notes “Flextronics (FLEX) had a wonderful 2014—up 45%—and we suspect that more is in the cards.” For his new pick, the editor of Contra the Heard looks to the nuclear industry.

GSE Systems (GVP) is a software company offering simulation, training products, and engineering solutions primarily to the nuclear industry.

In recent years, the firm has diversified somewhat, creating simulators for gas and coal fired utilities, along with other industrial plants from petrochemicals to desalination.

Over the past two decades, there has been some inkling of a resurgence of nuclear power, but 2011’s Fukushima disaster put something of a lid on that.

By so many other metrics, this looks like a classic Contra the Heard purchase. The company has no debt; it trades around book value, and insiders own 16.6% so are firmly vested. 

Plus, the backlog jumped 26.6% from a year ago, which works out to $45.7 million.

In December, the company acquired Hyperspring, which will further broaden GSE´s training product portfolio. The deal will lower the cash balance by $3 million, from the current level of $16 million of cash and equivalents.

Hyper had revenues just north of $19 million last year. The acquisition is expected to be immediately accretive to earnings.

GSE has been working with Hyperspring over the last four years, so that increases the probability that this takeover will be a success.

In conjunction with the Hyperspring acquisition, GSE invested $250,000 in IntelliQlik for a 50% interest. Our initial sell target for GSE is $5.74.

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