The story on Integrated Research (IRI) continues to be quite unique. The stock has doubled in a short period of time. Since then, the stock has just stabilised, but not consolidated. It is true that, even after such a rebound, the stock continues to look cheap for a software company : EV/EBITDA 24 of only 5.4 x (based on guidance they gave last week).
IRI has all the features of a successful recovery : - it has begun by largely decreasing its cost basis (- 21 %) while keeping a significant level of R&D (16 % of revenues), - and it is now almost stabilised its existing business (revenue retention of 98 % vs 92 % for H1 23) and it is gaining more new business, - according to the partial elements we have so far, the company is also doing better with its main weakness : the Collaborate product (representing 40 %+ of its revenues). The recovery of Collaborate just began during H2 24 as the company gained more new businesses, while also apparently improving its retention rate (main weakness for Collaborate so far). At this stage, I have not been able to identify any clear reason why Collaborate seems to be recovering.
The valuation does not seem to reflect this recovery, as the share price of around 0.80 $ is still far from its pick of 4.80 $ in 2020. Always dangerous to think that the company can go back to its previous high, but it just shows that today's valuation is far from reflecting a best case scenario.
Not sure if a lot of investors are aware that this company (market cap of 136 m$) is net cash (21 m$), generates a high level of free cash flow and has a high EBITDA margin (27 %). The company has no bank facility, so very focused on cash flow generation. Obviously, it is a micro cap, which had a severe correction vs its pick, so a limited number of investors are looking at it now. IRI is also a global company with 60 % of revenues coming from Americas. They mainly sell to large enterprises.
