Every Monday we feature “A Stock to Sell” as our daily post. With every stock or investment we recommend as a sell, we give you a full explanation of why we advise against investing in it at this time.
Research Frontiers (symbol REFR on Nasdaq; www.smartglass.com) invented suspended particle device (SPD) technology, a film-based system that lets users control the tint of glass or plastic.
The company aims to sell this innovation to clients in four main industries, the largest of which it feels is the automotive business, followed by aerospace, architecture and marine. It also operates its VariGuard division, which seeks to protect light-sensitive artifacts from damage.
So far, Research Frontiers says it has licensed its systems to over 40 firms.
One example is Mercedes’ S-Class luxury car, which will feature Research Frontiers’ SPD-SmartGlass system. The S-Class Coupe, as well as other variants, will offer an optional panoramic roof that uses this technology.
Stock advice: Confined to high-end niche markets, Research sees a drop in revenue
The company’s tinting system has appeal, but it has yet to move far beyond options for buyers in high-end niche markets like luxury cars, yachts, private jets and art galleries. That’s why Research Frontiers’ license revenue was just $1.6 million in 2014, down from $2.2 million in 2013.
Research Frontiers lost $4.4 million or $0.19 a share in 2014, compared to a loss of $6.0 million or $0.26 the year before. It’s using up its cash at a rate of about $3.2 million a year, but it holds cash of $9.1 million, so it has enough to sustain its operations for some time.
The company faces competition from other technologies, such as liquid-crystal devices, and major firms like 3M, Gentex, Pilkington, PPG Industries and Saint-Gobain.
TSI Network recommendation: SELL.
