Paul Tracy: Shares of LoJack (LOJN) Remain a Steal

LoJack (NASDAQ: LOJN) : LOJN continues to deliver outstanding financial results. Most recently, the stock jumped +15% after the firm topped Wall Street estimates with its third-quarter results, posting +37% and +74% increases in revenues and earnings, respectively. Meanwhile, the firm also issued bullish full-year earnings guidance, projecting that net income would increase by roughly 50-60%.

The firm's recent financial results have certainly been impressive. However, if you're a long-term investor, then over the long haul, these types of quarterly earnings fluctuations aren't really going to make or break your investment. Instead, you need to dig deeper to get a better understanding for the firm's business model. Will the company continue to be successful in the future, and if so, why? Is the firm's business model highly profitable? Also, does the company boast any sustainable advantages over the competition? These are just a few of the many critical questions long-term investors need to ask themselves about a company before they invest their hard-earned dollars.

The good news for investors is that when you start to answer each of these questions one-by-one, LoJack still looks like a great investment opportunity. The firm has developed a unique, highly profitable business model, and margins have been on the rise as the firm has grown. Gross margins jumped from 53% to 55% in the most recent quarter, and operating income as a percentage of revenue increased from 12% to 17%. LOJN also boasts a key sustainable competitive advantage over its peers -- it is the only system of its kind that is integrated into law enforcement agencies.

Here's how it works. First, LoJack customers purchase a small tracking device that can be hidden in any one of several dozen different places inside their vehicle. When they report the vehicle as stolen, the LoJack system triggers the device, causing it to emit a radio signal. Police officers then use special tracking equipment in their vehicles to detect the signal given off by the LoJack device.

Does the system work? You'd better believe it. LoJack's vehicle recovery system boasts a success rate of better than 90%, and the system has already been used to help recover more than $3 billion in stolen assets.

Thanks to the fact that its system is actually used in police cruisers across 24 states and in 25 countries throughout Europe, LoJack enjoys a sustainable advantage over the competition. (By comparison, most competing products merely call the police when a vehicle is stolen.) Meanwhile, despite posting gains of +100% already this year, the stock still trades at a very reasonable 20X next year's projected EPS estimates.

Looking ahead, as the company continues to roll out its vehicle recovery system to new states and countries around the globe, LOJN should deliver stellar financial results and continued gains for shareholders.

Good investing!

Paul Tracy
Editor
StreetAuthority Market Advisor

Paul Tracy is a contributor to StreetInsider.com: For More From Paul Tracy Visit: https://www.streetauthority.com/subscribe-ma.asp

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