This is funny. I was literally tasked with writing a 2-page investment memo on this stock as a case study for a job I applied to recently. My DCF came to similar intrinsic value, at $3.70 ish I believe. However, I also used a multiples analysis (is my sell-side showing?) and then did a 50/50 weighted average which brought my Target Price closer to $3.30 ish and "only" 30% upside. My conclusion was to not buy the stock for lack of liquidity, lack of exposure/coverage (how will anyone buy the stock if no one knows about it?), the mgnt team doesn't do calls, doesn't market, etc. Its a good company, its spits CF, if they re-instate the dividend (which they could easily do as they aren't pouring cash into growth initiatives) then the story becomes much more attractive IMO. This is to compensate for lack of liquidity and the potential for the stock to go nowhere or sideways (as it has for 25 years). I just do not see a catalyst for it to get to that next leg up of growth (granted you are conservative at 5,7,8% - I similar revenue growth rates). Its a great business for majority owners (the Flum family) but as a retail investor, I am scared it may just be dead money despite it being a good company. Just my 2 cents!
Jan 19, 2023·edited Jan 19, 2023Liked by Zippy Capital
I won't pretend that the below is sound investment analysis, but while the products are definitely delivering value to customers the screenshots of them look like absolute garbage (mid-2000s ERP vibes).
I think the UX/UI of their product is concerning for two reasons; (1) it's likely a drag on their sales/growth and (2) trying to fix it would consume cash.
This is funny. I was literally tasked with writing a 2-page investment memo on this stock as a case study for a job I applied to recently. My DCF came to similar intrinsic value, at $3.70 ish I believe. However, I also used a multiples analysis (is my sell-side showing?) and then did a 50/50 weighted average which brought my Target Price closer to $3.30 ish and "only" 30% upside. My conclusion was to not buy the stock for lack of liquidity, lack of exposure/coverage (how will anyone buy the stock if no one knows about it?), the mgnt team doesn't do calls, doesn't market, etc. Its a good company, its spits CF, if they re-instate the dividend (which they could easily do as they aren't pouring cash into growth initiatives) then the story becomes much more attractive IMO. This is to compensate for lack of liquidity and the potential for the stock to go nowhere or sideways (as it has for 25 years). I just do not see a catalyst for it to get to that next leg up of growth (granted you are conservative at 5,7,8% - I similar revenue growth rates). Its a great business for majority owners (the Flum family) but as a retail investor, I am scared it may just be dead money despite it being a good company. Just my 2 cents!
I won't pretend that the below is sound investment analysis, but while the products are definitely delivering value to customers the screenshots of them look like absolute garbage (mid-2000s ERP vibes).
I think the UX/UI of their product is concerning for two reasons; (1) it's likely a drag on their sales/growth and (2) trying to fix it would consume cash.