Mission critical SaaS company
At inflection point for only 1.2-1.3x revenue
It has been a while since I have hunted for cheap software stocks. The game with software stocks is to find companies that have high quality recurring revenue streams that are growing with very high gross margins that are about to be profitable. With some exceptions you don’t want to pay more than 1.5-2x revenue.
I found this particular stock, a UK traded document management company, by looking at one of my older stock watchlists. A few things that caught my eye and caused me to get back in again:
The stock trades at about 1.2-1.3x growing revenue
Customer churn is <1% and the average customer has been with this company for 10 years.
Cost of a subscription is only a small fraction of total cost to its customer, while the function it provides is mission critical.
Company is currently only slightly profitable.
Management has announced a plan to make cash distributions of between ~3-5x its current market cap by 2030 (and will receive compensation if they pull this off).
The CEO has bought several 100k worth of shares in the open market this year at prices slightly above the current share price.
Company is launching a new product that has been in development for 8 years and is possibly at an inflection point that will accelerate revenue growth again.
The stock is not very liquid with about £15k worth of shares of average daily trading volume.