Vapor Corp. (OTCMKTS:VPCO) Breaks Through $1, May Attract Promoters

Vapor Corp. (OTCMKTS:VPCO) broke easily through the dollar and on Thursday added more than 24% to $1.11, building up a steep trend up in the last week. The company is not currently in promotion, and the climb looks supported by press releases. Paradoxically, the releases are not so positive, suggesting that the business may suffer from a crackdown on e-cigarettes in Europe.

Still, the sudden buying interest of a relatively underpriced company is explainable. Fundamentally, VPCO shows the following financial data:

• $279,900 cash

• $4.6 million total current assets

• $6.3 million net sales

• $123,544 quarterly net income

As it is easily seen, VPCO is a typical cash cow business, valued at a reasonable 66 million with just 60 million shares outstanding, and at most 2 million volumes in the past record-bearing days. So far, pumpers were not interested in such a business, but the sudden spike in activity may cause some promoters to take up this ticker, even for free, to try to get a boost from its momentum.

The mention that e-cigarettes may come under closer scrutiny may mean VPCO will come under pressure, losing its somehow thin net income margin. So far, the company could absorb a stall in business.

But in the shorter term, what is interesting is whether the current high peak in the graph will be stable enough, or if there are corrections, how deep could they go. On the plus side, VPCO is not disproportionately inflated by paid pumpers. Still, the ticker reacts almost immediately to press releases, showing that the trading is quite affected by investor sentiment. On the whole, 2013 was suddenly active for the company, which shared more information with well-visited financial portals, thus boosting its stock in addition to the widespread use of e-cigarettes.

The company once visited $1.50 at the beginning of the year, spiking and dropping immediately. Another red flag is the change in names, from Miller Diversified Corp. in 2010. This is not immediately bad, but may indicate that the ticker is a vehicle for the e-cigarettes company. Also, the company has a hefty $500,000 convertible note, which may be turned into shares at 51 cents, subject to dilution constraints. But with 250 million shares authorized, the note may indeed convert and now looks like a proper time.

In any case, VPCO is unusually feisty and it is best to avoid investment unless you are prepared to make a decision based on your own research and can afford to absorb the losses.