Duos Technology Stock, AI Systems Can Prevent Train Derailments

Key Points

• Duo Technology provides artificial intelligence (AI) services to the railroad, transportation, oil & gas, and logistics industries.
• Its machine vision and AI systems specialize in inspecting and evaluating fast-moving vehicles in real-time to detect any potential issues before and as they happen and alert operators.
• Its systems have performed over seven million comprehensive railcar scans on 573,000 unique railcars across 11 portals across U.S., Canada, and Mexico, 35% of North America's total freight car population.
• Revenues grew 71% to $5.93 million in Q4 2022, but the company is still operating at a loss.

The interest in artificial intelligence (AI) is flourishing almost to the point of mania in the stock market. Having AI in your company's name can make speculators dive in head first, as evidenced by the recent 52-week highs hit by C3.ai Inc. NYSE: AI. AI has many versatile use cases, and ChatGPT has brought forth the reality of using AI in everyday tasks. UiPath Inc. NASDAQ: PATH implements AI for more efficient robotic process automation (RPA).

Duos Technology Group, Inc. NASDAQ: DUOT uses its AI platform to help prevent accidents. Its technology utilizes AI, sensors, and machine vision to evaluate and inspect fast-moving vehicles in real-time to detect any problems before serious accidents occur.

RIP Deployment

Duos Technology specializes in the railroad industry, providing its Railcar Inspection Portal (RIP). RIP utilizes state-of-the-art optical, laser, and speed sensors creating a high-resolution image set of all sides and undercarriage of the railcar. Its AI algorithms evaluate and detect safety and security defects on each railcar. It enables the ability to perform automated railcar inspections while running at full speed. Its technology can increase safety, improve efficiency and reduce costs for the railroad industry.

Duos has already deployed RIPs with Class I railroads and expect demand to grow from railroad operators and government agencies that operate and overlook railroad traffic. The company wants to expand in Asia, Europe, and the Middle East. It's also looking to expand into other industries, including trucking, aviation, and vehicle-based processes.

Train Derailments Boosting Interest from Congress and Potential Customers

Major train derailments are unfortunate events, especially when lives are involved. There were 1,164 derailments in 2022, averaging three trail derailments a day. Most of them were minor events. A 28-car derailment in East Palestine, OH, on Feb. 3, 2023, caused 11 railcars carrying a million pounds of hazardous chemicals to crash, sending chemicals into waterways and the air. Investigations found that overheated wheel bearings caught on fire and failed as a primary cause of the accident. The toxic derailment is expected to take three months to clean up, and seven CDC investigators fell ill during the investigation.

Legislative Actions

The Department of Justice and Environmental Protection Agency (EPA) are suing operator Norfolk Southern Co. NYSE: NOC for damages caused by the hazardous chemicals spilling into waterways and burning for days and EPA cleanup costs. They are seeking fines of $120,000 daily for each day the company violated the Clean Water Act. Duo has seen many inquiries about its technology as interest heats up in tightening railroad safety regulations. It has brought attention to the company as congressional leaders, regulators, and potential customers have requested requests for information on its AI inspection capabilities. The company works with three out of the six Class 1 railroads.

CEO Chuck Ferry commented, “To date, we have successfully engaged approximately a dozen congressional leaders from both parties in the House and Senate, including senators from our home state of Florida and have been invited to provide our input on pending legislative actions, including the proposed Railway Safety Act of 2023. This bill, which was introduced by a number of senators, including Florida Senator Rubio.”

Growth Stage

On March 30, 2023, Duos released its fiscal fourth quarter 2022 earnings report for the quarter ending in December 2022. Revenues rose 71% year-over-year (YoY) to $5.93 million, comprised of $4.92 million in technology systems revenues and $1.07 million in consulting and recurring services revenues. Duos is delivered two RIP projects and a new high-speed RIP project which will see revenues in 2023.

Net operating loss was ($960,000), up from ($240,000) in the year-ago period stemming from the increase in operating expenses and costs of revenue. The company secured contract modifications worth $1.1 million in upgrades for a long-term installation of its high-end RIP, which can capture images at 125 miles per hour. The company entered 2023 with a backlog of $10.7 million, which was higher than its total output in 2023. It expects to recognize $8.4 million of the backlog in 2023.

 

 

Daily Market Structure Low vs. Market Structure High

The daily candlestick chart on DUOT indicates a bull vs. bear struggle based on the market structures. The bullish market structure low (MSL) trigger is above $4.17. The bearish market structure high (MSH) sells triggers under $3.56. The daily stochastic coiled up through the 20-band indicating upside momentum from an oversold condition.

The weekly 20-period exponential moving average (EMA) attempts to turn back up at $3.43 as the daily 50-period MA is acting like resistance at $3.99. DUOT should get follow through on which market structure triggers first. Pullback supports are at $3.12, $2.46, $1.97, and $1.80 swing low.