The Audinate Ltd (ASX: AD8) share price has doubled over just the past year as investor excitement builds over this niche player in the audio technology space.
Today IT revealed an operating cash profit of $1.6 million for the quarter ending March 31 2019. However, after we back out a $1.33 million research and development tax incentive we can see the operating profit is closer to $300,000.
The company also finished the quarter with a little less cash on hand than what it started with at $12.2 million versus $12 million after we also account for $1.7 million in investing cash outflows.
Overall though this looks a reasonable result and revenues for the quarter were up 40% to $6.3 million, or up to $6.6 million on an "unaudited" basis.
Operating cash flow for the 9 months to March 31 2019 also came in 42% higher to $2.2 million.
This all sounds impressive, so investors will be asking what exactly does Audinate do?
As I've explained previously, Audinate's key product is its Dante enabled audio equipment that improves sound quality when installed in standard audio equipment.
The company's hardware and software allows professional audio equipment (speakers, mixers, mics, etc) to carry audio signals over a computer network, rather than using analog cables.
The advantage of this is that audio professionals can deploy audio solutions using existing computer networks instead of running analog cables throughout a building or venue.
Audinate reportedly also has a strong competitive position as its Dante product is preferred by audio equipment manufacturers, which all suggests the future is bright.
Outlook
Finally though we must consider the valuation as even the world's best company is not a buy at any price.
According to its latest regulatory filing Audinate has 57.4 million shares on issue and around another 8.8 million not quoted currently as they exist in the form of unlisted options, performance rights, or as restricted securities to 30 June 2019.
So if we just add in the 3.9 million time restricted securities we can use 61.3 million shares outstanding to give it a market value of $389 million based on a share price of $6.35.
I must admit I'm no expert on Audinate, but investors can see for themselves that Audinate's valuation has a lot of growth baked in based on the current financials.
Whether it's a buy or not today will largely depend on whether it can deliver or not on the growth expectations.
