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Last week, I found an interesting company: Aware inc. It’s a $100 million market cap company. Aware is a provider of authentication software and services to the security industry.

The Company’s software products are mainly used by governments and commercial systems to identify or authenticate people. What’s interesting with Aware is that it has a pristine balance sheet, $61 million assets vs. $4 million in liabilities and 80%+ of the $61 million is from cash. WOW!

(I have to say that what’s in this text represents my opinion only and it’s purely for your information. Also, always seek advice from registered investment advisors before investing)

My feeling is that they don’t know what to do with all this cash so they buy back loads of their stocks which is, by the way, the best way to return money to shareholders, better than dividends; 10% last and next year. Aware generate substantial cash flows as well: $4 million from only $22 million sales last year.

However, as indicated in the annual report, this business has lumpy sales and I don’t see any meaningful growth. Besides, I feel that it is still expensive given a “price/free cash flow” ratio of 30. Normally, I would have tried to understand if this business has strong moats around it but I didn’t push my analysis further because of the lumpy and flat sales.

To sum up, Aware is an interesting cash cow business but I’m not an investor for now; sales growth are too flattish to my taste.