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July 18, 2005 Stock Pick: Digital Recorders, Inc. (TBUS)

Stock Price: $2.45

Digital Recorders, Inc. operates within two business segments, mass transit communication and law enforcement/surveillance. Their technologies improve the flow of people through transportation infrastructure, mitigate security threats, and enhance law enforcement agencies' surveillance capabilities.

This company is another homeland security, surveillance play after the recent train and bus bombings in London. The London bombings came after the train bombings in Madrid last year. These bombings of mass transit are becoming a trend within the western world. It is only a matter of time before advanced surveillance systems are placed on all mass transit and even on the streets of every major city, the market is boundless.

TBUS first quarter results were weak and below company's expectation primarily due to order delays, which will substantially be shipped in the second quarter. Second quarter results should show an improvement in revenue and net income.

Right now, TBUS has a book value of $2.25 and 7.96 million shares in the float. The company believes they can eventually reach revenues of $60 million. With a market cap of $24.7 million, TBUS seems undervalued at current levels.

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