I understand my views may not be especially welcome here these days, but this is the sort of discussion I enjoy. When it comes to talking valuations, if there's one thing tech investors have learned in the past 12 months it is to robustly challenge the multiples that are applied to revenues.
I started tracking a basket of ASX fintech companies in early 2021. Go back 12 months, and the average weighted revenue multiple being applied was 29x. If you look at that same basket of companies (minus Afterpay, who were acquired at the top of the market for 40x revenues!) this is what it looks like as of yesterday's close:
The revenue multiples have pulled back into the low single-digits, for reasons we all know - but which can be summarised by: 'cash burn' and 'interest rates'.
There is one company that sticks out here. Whilst most on these threads think IOU is super cheap, when you compare it using FY21 revenue, it is already being valued way over every other company on the list. Funnily enough, if 612's revenue estimate is $28M, at IOU's current market cap that would be a multiple of 2.9x which is bang in line with the weighted average. So if you're still wondering why all the quarterly and mid-quarterly announcements are not moving the share price much, I think the answer is above. And, yes
"IOU are more than BNPL!" but so are many of those companies in there too - it's a proper Fintech list, not just BNPL. There's payments companies (EML, Tyro) and lenders (Wizr, MoneyMe, Humm) and a bunch of BNPL's. One thing I'd point out is that from FY15 to FY20, the old iSentric business was priced on a revenue multiple anywhere from 0.17 (2019) to 1.34 (2016). You can go and check the numbers for yourself. But I see no reason why a market would suddenly apply a 10x or 15x multiple to the revenue from iSentric just a few years later. It's the same business - essentially data processing fees.
I provide this as food for thought - because peer comparisons are very useful in setting realistic expectations. Looking at that table (which is the market talking, not me) it does seem that there's already a lot of future success already being priced into IOU's current market cap.
