Growing Company with Obscure Financials, 50% Market Share and Big Optionality
Research report on a company from my Watch List
Hi All,
Today I will tell you about a simple US business undergoing interesting development. They have two segments, one of which is very profitable, growing and enjoying 52% market share while stealing consantly share from competitors. The second one makes the financials obscure because it is losing money and not creating any economic benefit yet. The decision about this segment should occur in short timeline.
This is not a sexy SaaS business or fast growing company. This is a good old business from the US, that dominates its niche and scissors for big decision are narrowing. If they get an approval, company will have game-changing product that will probably spark very high growth as it is superior to competitors and priced 3-4x more.
If they wont get approval, they should cut all costs and obscured financials will get visible. The company would be left with superior product for which they are growing capacity to satisfy market demand. Either way, I believe day D is coming soon. Today it is priced for the “old” and I believe in few years it could be priced for the “new”.
Summary
Two segments make this unscreenable. One is profitable and growing with 50% market share. The second does not generate revenues and is waiting for FDA approval. This creates good optionality. This is not your clasic pharma or biotech.
The company experienced temporary issues, unrelated to any success/failure in the long term, which pressured the margin.
Shares are extremely illiquid & the company is not broadly covered. No VIC write-ups, rarely discussed.
Activist and terrific micro-cap investor involved.
Product is premium priced and is taking share from much bigger competitors
Revenues grew 16% CAGR during the last 6 years
Shares are trading at forward 7x EV/FCF not considering hard assets
Huge optionality in new potential significant growth driver and margin increase
I believe upside of 100-200% in a few years is possible while significant assets protect downside