Its important to focus on what might cause a re-rate. I would say the following are pretty high on the list
- Jump in ARR over a few quarters - Sustainable CF positive - Insto on the register (likely a function of above)
Management comments indicate ARR is hard to predict short term, and have stated medium to long term outlook is unchanged. Therefore it would be a positive surprise if there was a short term bump. My feeling was that the North American business was one of they key growth areas and they have quite a bit on their plate with Covid issues, additional lockdowns, elections etc. So im not expecting any significant movement until at least after June 2021
CF breakeven is a short term catalyst and as most know its slated by end of CY2020. I feel that the Dec 2020 quarterly would be the earliest 'clean' quarter and cash receipts will be key, as will normalised employee costs.
It will likely take some institutional money to rerate this stock, and i wouldn't expect them to make an investment unless the company can demonstrate they have costs under control, ARR continues to grow and they are comfortable that there is a sufficiently large untapped addressable market. If you want a re-rate sooner rather than later i guess you would need a fund to decide that LVT is cheap and that they are getting in early. They would need to believe that their product is valuable and will be a beneficiary of the "distributed workforce".
LVT is either cheap, or the other stocks are expensive... however its YoY revenue growth holds up, however it may not look so good come Dec 2020/March 2021 once Covid period washes through. Here are some "SaaS" ARRx, note some work needs to be done to ensure that ARR makes up more than say 90% of revenues to ensure its a relevant comparison. However most of these companies aspire to have ARR as main revenue source. This is just a quick reference
ARRx
ARR
YoY ARR Growth
MCAP
Notes
1
ASXUB
15.3
$16,100,000
22%
$246,381,236
2
ASXTC
11.6
$20,020,000
38%
$231,541,056
91% recurring
3
ASX:SKO
11.9
$24,100,000
16%
$287,530,300
93% recurring
4
ASX:BTH
9.0
$36,000,000
53%**
$322,349,098
**40% organic growth
5
ASX:NTO
11.5
$40,000,000
40%
$458,750,452
47% recurring, annualised quarterly growth
6
ASX:WSP
10.0
$42,200,000
36%
$423,812,595
7
ASX:LVT
4.0
$53,800,000
34%
$216,533,731
8
ASX:ELO
9.0
$55,100,000
20%
$496,833,485
98% recurring
9
ASX:IFM
7.5
$90,981,500
12%
$681,512,898
95% recurring
**Note sure what happened with the table but the first stock is DUB and the second is DTC
Check the register of most of the high ARR multiple stocks in this space and you will find they have an institution on their register.
Being undervalued isnt unheard of and doesn't necessarily mean its bad company. Perhaps running it like it was going to be the next Atlassian without the reputation and therefore ability to raise money from bottomless pits was the issue.
On a side note, it would be good to see more partnerships with Aussie SaaS. Im sure LVT could integrate Nitros software for instance in the same way they did Canva.
Im a holder and i think it will be a few years until you start to see it re-rate and even then it may be that its just getting started.
UB
