Wednesday, November 16, 2011

Visualant (VSUL) Sees Something I Can't See

I received a brochure quite some time ago (months?) from John Person's Bottom-Line Newsletter touting Visualant (VSUL) and its purported ability to massively grow its revenue through acquisitions.  How has that worked out? 

The topline results are easy enough to find in the 10-K.  VSUL earned about $2.5M in its year ending Sept. 2010 and nothing prior to that.  Its most recent acquisition of Eagle Technologies USA expects to add $1M in revenue immediately.  The strategy behind this acquisition escapes me.  Eagle Technologies makes blank PVC identification cards - a commoditized product.  Visualant needs to explain how this business fits with its core strategy of selling spectral pattern detection devices - a unique product.  Will its scanners somehow come bundled with the cards for existing Eagle customers?  They need to stand out quickly in a market crowded with suppliers of barcode readers.

I will give the management team and directors a thumbs up for their depth of experience.  The problem with taking a company like this public before its business model has matured is that its share price will languish as a penny stock until the bottom line catches up to the technology's potential.  In this case, the horse hasn't quite caught up to the jockeys yet. 

Full disclosure:  No position in VSUL.