@LT_Investor, I completely understand your concerns, right now the numbers you’ve presented doesn’t look good.
I remember Nearmap was brought to the attention of many Team Invest members on TV many times and because of these financial figures, they won’t touch the stock at all (regardless of the share price).
https://hotcopper.com.au/threads/nearmap-on-yourmoney.4569147/So this means if a company is currently not making any profits then Team Invest members will not even consider it an investment at all.
So I too know your frustrations in trying to understand the “disconnect” between Nearmap’s current financials and their share price.
But unlike holding a blue chip stock with somewhat predictable financials, I find holding Nearmap is a constant battle between my Logical mind & my Passionate mind.
And yes, what is with the crazy share price going up & up while the growth expenses keeps on piling up & seemingly still no profit in sight ?
For me, the answer is that I’m not holding (or even buying more) into Nearmap because of its current financials, so despite the red in its books, as long as Nearmap survives this extreme growth phase (& without perishing), then profitability awaits. So how do I know profitability awaits? Well, if you strip out all costs associated with any International expansions, you will quickly come to the realisation that domestic revenue income within Australia is already very profitable!
So as long as Nearmap can keep their operational cash flows in check during this extreme growth cycle then eventually all International expansions will be profitable.
Why?
Because Nearmap is already profitable in AUS and the fact that we’ve been getting frequent updates that US is tracking ahead of the original AUS expansion in the same growth timeframes. And with the US population 10x the size of AUS it is natural to conclude that US will also be very profitable at the end of the growth phase since Nearmap is clearly not spending 10x their AUS expenditure in developing the US business.
I believe the NEA share price has been creeping up NOT because of their current finacials BUT because their growth (both in AUS & the US) are tracking well and exceeding their guidance.
Now, we all know that a company’s share price reflects their future potential earnings, so judging from the current share price trend, it appears that the majority of investors also have great expectations that NEA will be an earnings powerhouse for years to come...
I guess time will tell, but if NEA is trading at these levels now (& still not yet making a profit), I would love to see what price levels it will be trading at when it starts to make a profit.
Naturally when profits do arrive for Nearmap in the future, I can just see that many value investors will then question why NEA have a PE ratio of well over 100.
