This morning Globo (LSE: GBO) announced that one of its existing customers, an undisclosed US Fortune 100 company, has submitted a purchase order to continue a contract worth $1.2m on an annual, renewable basis.
The order was for 50,000 licences for Globos GO! Enterprise software, which allows employees to use personal mobile devices to connect to the company network through a specifically designed browser in a safe and secure manner.
CEO Costis Papadimitrakopoulos was encouraged by the repeat business, stating:
We are delighted to receive this purchase order which we believe represents one of the largest BYOD implementations, in terms of number of devices, worldwide and confirms Globos traction in its key US market.
Shares remained largely unmoved in early trading, likely because the market expects renewals from the majority of Globos customers.
The company has grown revenues and profits strongly in recent years and now trades on a lowly PE of only 7.4.
The market has been cautious about Globo ever since infamous city investor Simon Cawkwell, nicknamed profit of the plunge and often referred to as Evil Knieval, shorted the stock after pointing out that soaring profits never translated into cash.
Indeed, a quick look at the last four years annual reports show that the vast majority of reported profits, nearly 80%, has left the company through large and negative working capital movements.
This is worrying, largely because the majority of cash is not available to reinvest or to provide a safety buffer.
Profits can be manipulated, although Im not accusing Globo of doing so, but cash truly is king and an inability to create free cash flow is more than enough reason to avoid the stock. It is also why The Motley Fool likes proven, dividend paying companies you cant conjure up cash payments to shareholders with accounting chicanery.
Reinvesting dividends can also be a source of massive wealth creation.
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Zach Coffell has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.