6/11/24 - $strm - interesting, but ~25c maybe k? avoid 4 now.6/11/24 - vrockstar - NASDAQ:STRM - interesting niche biz here providing data-related solutions to the healthcare rising tide. 25 mm cap and 10 mm debt - yuck first of all to the debt, but whatever (and it is relevant). looks like revenue growth isn't great - but when you dig in there's a change that seems to have been made to account for revenue and COGS differently - so look at gross profit for now esp when thinking about the '24 bogey and how this factors into valuation:
so here i clearly have a small/ sub scale software that's growing gross profit perhaps 15-20% at best. still not profitable. so first point - we're half (at best) rule of 40, so if i was just going off the new proforma revenue number, which the market is likely to do, at 20 mm let's say - i can't pay more than maybe 2x if my consideration set is everything (for me it is). if i'm in industry, have a more nuanced POV and believe in what's happening here under the financials (more on this below), maybe 3x - i'm at 60.
so while i don't know the company well - i'm adding it to my long medical-related watchlist - if i can pay 5x gross profit on my favorite name NYSE:YOU on adjusted enterprise value - do i pay 2x-3x on this? maybe sure that's 25-30 mm - which is where the stock sits. BTW fam - that's not obvious math - that's me trying to be generous. and when you consider the toxic 10 mm of debt which is 1/3 of the capital stack in a co that clearly will need to keep diluting to growing... this is a tough one to own
the conclusion here: i'm not tempted to own it, to play EPS or even to chase it if it's up (and especially if it really starts runnin). the risk/reward is NOT there unless something fundamentally changes/ inflects. this isn't the type of stuff that's going to turn on a dime either - my sense is this is long cycle sales stuff esp in a high rates environment where hospitals are getting more gutted by the day on expenses.
maybe you could buy for a quarter 25c? but at that point/ if/ as we get there, i'm sure there's other stuff we'd probably want to own more and have merit to see incremental flows before this does. perhaps it's a take out. sure. but i don't just park in stocks like this to cross my fingers and hope. i'd just avoid it for now.
-V
