"That has been pushed off, revenue growth is great but at some point that has to flow through to the bottom line. Operational leverage is not yet apparent. "
In terms of maximising shareholder value creation, I'd far sooner have operating leverage start to manifest itself from a Revenue base of $20m (or $25m or $30m), than $12m.
But to get to $25m requires getting and on-boarding more customers. And getting and on-boarding new customers does not come for free.
Conventionally, it is preferable that operating costs are kept low. But that is a bit of an oversimplification that overlooks the fact that some costs are actually "good" costs, where the financial return that gets generated from that cost outlay is attractive and value-accretive. In which case it makes eminent sense for those costs to be incurred.
The real question that needs asking at this stage of the company's evolution is not where the operating leverage is, but what is the relationship between the lifetime value of a customer and what it costs to get that customer on-board.
Someone recently kindly sent me a report that suggested that the lifetime value of a customer should be a multiple of at least three times what it costs to acquire that customer.
To date, I have not been able to derive that figure for SKF.
I'd be very keen to hear from anyone that has given it a go.
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SKF Price at posting:
17.0¢ Sentiment: Buy Disclosure: Held
