Digital Ally Rises 17% After Earnings; Time To Buy?

Digital Ally, Inc. (NASDAQ: DGLY) is up more than 17 percent in after hours trading after the company announced its fourth quarter results. The company's revenue increased 55 percent to $5.4 million versus $3.5 million in the year-ago period.

Is Now The Time To Invest?

"Unless they get to at least $10 or $20 million a quarter, I don't know if the business is sustainable," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga.

Udall joked that he could have a website that generated $5.4 million a quarter.

"I certainly could have a money management firm that generates $5.4 million a quarter in revenue," he said. "These numbers would be laughable to a guy that's running a hedge fund that has $200 billion in management."

Udall didn't want to be too hard on the company. He said he hasn't spent a huge amount of time looking at the firm, and he's not the only one. As of this writing, there aren't any Wall Street analysts covering the stock.

"For that company, they're executing," Udall said of the Q4 results. "They're doing okay."

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Make More Money By Ignoring Digital Ally

Udall said that if investors spend more time ignoring companies like Digital Ally, they will "end up having a much larger portfolio in the future."

"This is not in any way an opinion on [Digital Ally]," he added. "It's just an opinion of companies of this size."

"There are so many companies… Twitter is gonna do $3 to $4 billion in revenue and has a much, much higher growth rate than Digital Ally. When Twitter was doing $5 million to $10 million a quarter, I don't even know what their growth rate was."

During the fourth quarter of 2014, Twitter Inc (NYSE: TWTR)'s revenue increased 97 percent year-over-year.

"You can find companies doing $2 to $3 billion in revenue with an 85 to 100 percent growth rate," Udall continued. "Why on Earth would you want to mess around with a company that is doing $5.5 million in revenue with a 55 percent growth rate?"

Attractive Acquisition? Someday

There has been a lot of talk about how GoPro Inc (NASDAQ: GPRO) could thwart the growth of Digital Ally and other companies building law enforcement cameras.

What about the idea of Digital Ally building GoPro-style cameras for consumers?

"That's an interesting concept," said Udall. "I wouldn't say it would compete with GoPro. If I'm Digital Ally, I want to do well enough to get bought by TASER or GoPro. That would be a huge victory for them."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.