Is SWF Significantly Undervalued?, page-2

@mynameislee

Ignoring the unit economics in this sort of volume-driven business is fraught with danger.

Because when you look at the outside of the SWF car it might look all nice and shiny, but when you take a proper look under the bonnet you'll see a starkly less enticing picture.

When the share price was last at this level - which was, as you said, during JQ2020 - the company was generating quarterly revenue of around $90 per trader and Operating Cash Flow (positive) of $15 per trader.

But that was clearly an unusual time (people stuck at home during the first nation-wide lockdown and with nothing on which to spend their government handouts).

Fast forward to today, and the company is generating less than half of the Revenues per trader than it was during JQ2020.

So sure, they have more customers that they are theoretically able to invoice but the value of each invoice has halved, with the net result being that they have been incurring increasing cash outflows despite the significant increase in customers on their books:




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What has to happen to turn this around is that the growth in the number of traders has to exceed the rate of decline in the revenue per trader - not just at some single point in time, but over a sufficient period of time until the point is reached where the company ceases torching capital.

And what the nexus, between Number of Customers and Revenue per Customer, looks like going forward, is anyone's guess.

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