Dental Microcap #2: AFP Imaging Corp. (OTCBB: AFPC)

It is curious; over the years we have made many immense trades by just trading stocks that seemed to mimic other stocks. In the late 1990's we watched Yahoo make some noteworthy moves, so we decided to look into search engine stocks. We ended up buying stock in both Lycos and Excite. Lycos and Excite stock fared extremely well, just like Yahoo. Basically the same thing happened with a stock called FONX. At one time voice recognition stocks were red hot. We remember seeing one particular voice recognition stock take off like a rocket only to be soon followed by a second voice recognition stock. We fired up our trusty stock screener and searched far and wide for stocks having anything to do with voice recognition. We found an undiscovered stock called FONX and it seemed to be the last voice recognition stock that had not made a run. We couldn't believe our luck with this find; it appeared to be too good to be true. At the time the stock had minimal volume, which did make us a little apprehensive, but we bought the stock nonetheless. We figured why fight the trend? If voice recognition stocks were hot, this stock was going to be found soon enough. We picked up shares in FONX at a quarter. In just a few weeks, FONX was found by the investing public. We had beaten them to the punch! Just as the other voice recognition stocks had done, the FONX train left the station.  FONX had risen as high as $3 when the dust settled. It was not a bad little profit from making a simple observation.

When a stock mimics other stocks it is not a new concept. It occurs all of the time. It was search engines, online brokerages, and e-commerce sites in the late 1990's. After the tragedy of 9/11, anything that was related to homeland security made considerable gains. More recently, any stock that had a connection to the real estate boom was a safe bet for nice returns. One of the tricks to taking advantage of these situations is to recognize them before everybody else does.  You are too late if you are buying a stock after you've heard about it on CNBC's Squawk Box. The savvy investors who found the stock earlier are selling and thanking CNBC for the free advertising while you are buying.

As you should well know by now, we feel that the dental sector is a safe bet for substantial future gains. Many dental stocks have already achieved these gains, but there are a few dental stocks that have not been discovered yet. One of these stocks is AFP Imaging Corporation (OTCBB: AFPC). In the section titled Penny Stock Success Stories we chronicled the path that Schick Technologies (NASDAQ: SCHK) took from the Pink Sheets to the OTCBB to its final destination on the NASDAQ. Bear in mind that this stock made a nice steady climb from $2 to $45! In AFP Imaging, we see striking similarities to SCHK.

AFP Imaging, like Schick Technologies, is a company that researches, develops, markets, and sells dental digital radiography systems. When comparing the two companies, we are reminded of what we saw in SCHK a few years ago... before SCHK made its huge run. SCHK was trading at around $2, very similar to where AFPC is trading now in early 2002. At that time, SCHK had approximately 10 million shares of common stock outstanding. Currently, AFPC has about 12 million shares of common stock outstanding. In 2002 SCHK had revenue of $24.4 million and a net income of $3 million. Currently, AFPC has revenue of $23.1 million and net income of $1.9 million. While SCHK had total assets of $11.9 million and total liabilities of $9 million in 2002, AFPC currently has total assets of $8.1 million and total liabilities of $3.5 million. In 2002, SCHK revenue increased by 14.8% over the prior fiscal year. In their most recent SEC 10K filing, AFPC noted an increase in revenue of 16.6% over the previous fiscal year. In their SEC filings, both companies noted that reason for increased income was an increase in sales of their digital radiography products in both the domestic and international marketplaces. SCHK spent $9.5 million in 2002 while AFPC spent $7.1 million in 2005 comparing selling/general/administrative expenses. We hope that by now you get the point. In our opinion, the current status of AFPC is very similar to SCHK in 2002. To make things a bit easier, we have listed these similarities comparing 2002 SCHK to current AFPC.

In reviewing the chart, multiple similarities can be seen between the SCHK of 2002 and the AFPC of today. Going on the theory of stock mimicking, consideration of this chart should create excitement about the potential future gains for AFPC. From 2002 to 2003, SCHK nearly tripled in price from $1.06 to $3. From 2003 to 2004, SCHK rose from $3 to $7.45. From 2004 to 2005 SCHK improved from $7.45 to $16.50. In 2005, we know that SCHK approved to merge with Sirona resulting in a $45 stock price. SCHK still rose to $24 on its own advantage previous to the announcement of the merger disregarding that transaction. In just a few short years, SCHK rose from $1.06 to just about $25. Bearing in mind that most investing experts consider a 7% yearly gain advantageous, SCHK's return of over 2000% from 2002-mid 2005 is extraordinary. A return of over 4000% was achieved when you add in the additional gains from SCHK's merger with Sirona! Will AFPC mimic the results of SCHK over the next few years? The answer, of course, is that no one knows for sure. Nonetheless, when you consider the similarities between the SCHK of 2002 and the AFPC of today, you should get a warm feeling inside.

While we have noted that SCHK of 2002 and AFPC of today are eerily similar, there are some differences that we must also draw attention to. Schick Technologies also sells a Bone Mineral Density Assessment Sensor that helps to determine fracture risk for osteoporotic patients in addition to their dental imaging products. Furthermore, Schick sells a few products such as wireless sensors that AFP Imaging does not presently offer. On the same note, AFP offers products that Schick Technologies does not. In adding together to their dental digital radiography line of products, AFP Imaging also offers a full line of veterinary digital radiography products. There are 73,000 Veterinarians in the US today according to the American Veterinary Medical Association. There is a huge opportunity for sales of veterinary digital radiography units with a large majority of these Veterinarians operating a private practice. As a matter of fact, in their February 2006 SEC 10Q filing, AFPC noted a 7% increase in sales between the fiscal 2005 and 2006 six month periods, with a large majority of this increase attributable to its new general purpose veterinary digital x-ray systems.

Let’s take a look al some exciting characteristics unique lo AFP Imaging stock aside from comparing AFPC to SCHK. AFPC has a total of 12.3 million shares outstanding this total is microscopic for an OTCBB stock! AFPC has a Tradable float of less than 8 million shares of these shares. 8 million shares might not mean much to some of you out there, but to a seasoned penny stock investor, a float of 8 million shares is enough to make one salivate. A small float such as that of AFPC offers the potential for electric price movement. AFPC could see tremendous movement in its stock price with any amount of substantial volume. As it currently stands, AFPC has a daily average Trading volume of just fewer than 20 thousand shares. That's a mere $40 thousand per day trading hands for this stock. Notwithstanding this miniscule trading volume, AFPC stock is still up nearly 50% over its 52 week low. Just imagine what this stock could do with a little volume! One more thing, we know that we said we would stop comparing AFPC to SCHK, but we do want to mention one more thing. AFPC's current daily trading volume is very comparable to that of SCHK in 2002.

Beginner Money Investing Dental Stocks Dentistry Stocks in Market Dental in Future Markets Dental Microcap #1: Bio-Lok International (OTCBB: BLLI) Dental Microcap #2: AFP Imaging Corp. (OTCBB: AFPC)