Ok CRO (I’m more of a CROO man myself) enthusiasts and others please see the below:
Disclaimer: This is pretty back of the envelope stuff andI am by no means a modelling expert and there are a lot of unknowns here. Thereare a number of ways to value a business and this is a pretty simple one. Witha growing SaaS / Payments company there are a number of other factors (churn, CAC,LTV, future acquisitions, management (Number of Goats) etc. to consider. Thismodel can’t take any of that into account and focuses on revenue multiples to determinemarket capitalisation (MC) and therefore share price (SP)
A few points on my assumptions:
Growth Rate Per Quarter: Obviously this is a large unknown and the real driver of the MC moving forward. For CY21 I’ve assumed we maintain our current growth rate and have assumed this number reduces in CY22 & CY23 (I’m an accountant by trade so I’m conservative, no hockey sticks!).
If anyone has strong views on the growth rates I’m happy to plug them in and share what that does to MC & SP.
Appstablishment: I’ve assumed $500k additional revenue per year after the merger (I’ve seen that number quoted on HC, not sure of the exact figure)
Revenue Multiples: Another tricky one to determine, once again if anyone has strong views, I’m happy to update. I’ve based my ranges on the below article I read for SaaS business I’ve used:
· 11.4 times the median from the article
· 17.9 times the average from the article
· 20 times as I believe this is greater scope than a pure SaaS business
It’s also worth noting it’s not uncommon to see some pretty large multiples for earlier stage companies (in the report I mentioned companies’ multiples ranged from 8 times to 120 times)
Shares on issue: I assume about 2.5B shares post-merger (1.7B + 825M), for simplicity I’ve assumed all the remaining CROO is converted Q2 2023 (512m)
The market is forward looking Everyone knows that the future earnings of growth stocks are factored into the price, this is why with our MC of $115M we’re trading at roughly 87 time sour current annualised revenue ($1,319,772 / $115,000,000).
Based on my (very rough) model our share price is trading 4-5 quarters ahead of where we currently are, which makes sense to me.
If we are conservative and take 4 quarters in advance it would mean our share price range would be:
· 31/12/21: 0.24 – 0.43
· 31/12/22: 0.78 – 1.36
Potential Upside
This does not consider any other upside that may come in the form of:
· Bolt on acquisitions
· Material international expansion (which I believe will happen, but who knows when?)
· Government legislation
Risks
The key risk I see with this is how will CRO keep up with that sort of growth? How will they generate that many customers? To hit the final revenue number in the model that’s over 1 million customers / licences, is that realistic?
Conclusion
I don’t think the model considers other key factors that would materially impact the share price, the key one being overseas expansion. I hate comparing CRO to APT & Z1P (I think it’s oversimplifying and lazy) but if we look at how quickly they have been able to penetrate the US market if CRO could do the same the sky really is the limit and US revenue could very quickly match and outgrow the AUS market.
With that being considered my prediction is:
· 31/12/21: 0.60 – 0.70
· 31/12/22: 1.75 – 1.95
Based on that I'm going to top up tomorrow morning
Happy for comments / robust discussion to build a more accurate model.
Please don’t just post rocket ships telling me the price will be $5 soon with no support, that’s just boring.
(20min delay)