Wise OWL released a report on FOD which reinforces my thinking...

Wise OWL released a report on FOD which reinforces my thinking that FOD is undervalued and if they can keep sales, EBITDA and positive cash flow increasing then the SP should increase too.

Here's an extract from their report.

Price to Sales Ratio

One common metric used to assess growth companies is the price-to-sales ratio.

This is essentially a measure of how much an investor pays for a share in a company for every dollar of sales that company makes.

Being below 1.0 is usually a good sign, assuming there are blue skies ahead and the company is growing.

As we mentioned above, we think that FOD is on a Fix → Reset → Grow trajectory.

So if we view FOD as in the ‘Growth’ stage of its lifecycle, we can use this metric to assess FOD’s potential to re-rate its share price as sales grow.

Using FOD’s current market cap, the company has a price to sales ratio of ~0.68, which means that investors are essentially paying 68c for every $1 that FOD makes in cash receipts from customers.

Enterprise Value (EV), as compared to market cap, is potentially a more accurate way to evaluate FOD as it includes the company’s cash balance and outstanding debt.

FOD has an EV of ~$28M (market cap $24M – $0.9M in cash + $5.2M in debt).

Back of the envelope calculations show FOD’s EV / Sales ratio is ~0.8 — still lower than our benchmark of ‘1.0’ for growth companies.

Both “Price to Sales” and “EV to Sales” ratios indicate that FOD could be primed for a steady share price re-rate IF they can continue executing on its growth initiatives.