I agree that there are substantial returns on offer in the smaller end but investment 101 is risk/reward. In the same time we have been holding 3DP, a lot of mid-large cap stocks have completely outperformed. A lot of risk at the smaller end so we deserve to be compensated for that risk (think CAPM pricing model).
3DP clears a few checklist items but it hasn't hit the mark (yet).
1. A healthy return on equity which also displays a level of consistency and growth. Fails this hurdle. Receipts are choppy and ACV growth has been meh. 2. Balance sheet safety, minimal debt and/or strong interest coverage. Clears this hurdle and I believe we have sufficient cash for the next 12 months. 3. Well priced on P/ACV & P/REV and focus on measures of business quality such as margin growth and cash conversion. Clears this hurdle, priced almost as if it won't grow this quarter or next. On several multiples lower than NEA/XRO. Our margins are very good which makes the business extremely profitable if we land large contracts. 4. Do not ignore relevant industry thematics that can shape a specific business outlook. Pay attention to headwinds and tailwinds. Clears this hurdle, although, I'm not an expert in the sector - I think 3DP is well placed to capture decent market share. 5. Have an investment timeframe in place which relates to the company catalysts and stick to it. Failed this hurdle miserably. Well off the TMT estimates and for that matter my original expectations.
6. Aligned management team with skin in the game. Clears this hurdle - both Ian and his wife holder > 30m shares. A couple of small fund managers on our books that support the free float.
I don't mean to bag out Canary Capital but they are honestly a nobody in the investment space. I've worked for and with managers like KKR, Regal, Fidelity, Perpetual, etc and none of them would even touch this at the current position. I mean that's a plus for punters like us.
3DP Price at posting:
4.2¢ Sentiment: Hold Disclosure: Held
