ValCom, Inc. (PINK:VLCO) made a 130% yesterday after it announced in a press release that it had made a big quarterly profit. The stock jump rendered the company’s market cap at $4.4 million.
One day before the announcement, the actual 10-Q report was filed. Based on the data from this document, the company has reported a net profit of $16.4 million. For the same period last year VLCO had a net loss of $1 million, which puts out the question how did this unbelievable change in the company’s finances happen?
It happened due to the valuation of VLCO’s audio and film library. The whole library is currently estimated at $18 million, but at the same time this is the point where red flags start to appear. Most important, the announced appraisal of the library, along with the rest of the financial data in the 10-Q, is not audited.
It must also be taken into account that this is part of the intangible assets of VLCO, which seriously undermines the book value of the company. Thus, if the library’s supposed value is disregarded, it turns out that VLCO has actually accrued a net operating loss of $167 thousand for the quarter.[BANNER]
In this regard, it is not very certain whether the current market sentiment will survive, once traders find enough time to analyze the financial report in detail.
At present, the ADX indicator doesn’t indicate that a strong trend has formed. Therefore, the emphasis should be put on the oscillating indicators which show that VLCO stock has already entered the overbought area.
That being said, it cannot be sure that VLCO will get back to its previous trading rage. The stake is in investors hands who will decide if VLCO’s declared financial achievement is worth considering or not.
