I think I have been pretty clear that a $1 billion valuation is not a realistic valuation at the present moment with the present fundamentals, although I would say it is still certainly possible based on a peer analysis. For now, I would be a bit more conservative and target something around $150-$300m in the near term, so long as the results they release in a month and a bit show continued strong growth in revenues. Assuming they can quickly get to around $35-40m revenue (with the current growth rate they will be there in no time at all), that would be a pretty reasonable valuation. Who knows though, often when prices start to really take off the market becomes more and more excited, pricing in more of the "future potential" than it did previously. That post you are replying to mentioned pathways to a billion dollar plus valuation, not reasons for a $1 billion valuation today, which are certainly things to look forward to, but not something I would be looking at yet as a given. Things like 2RT, the wider adoption of interventional glaucoma management, further indications etc. are just some of the things that could help send this to a one billion dollar market cap, but until we get confirmation these are still all speculative things to look forward to but not things I would expect as being 100% in the bag. I could make you a DCF model based on hypothetical scenarios, however I don't think that would be all that useful (unless you want to get excited with big numbers). For the current fair value estimate, I would simply apply the average and quite conservative 5-10x revenue multiple you see in small growing healthcare stocks. If you want peers, use SGHT and Glaukos. These actually give a more exciting valuation than I do, with SGHT as an example recording a 50x revenue multiple when it was recording its highest rates of growth. A comparable valuation for EYE at its current revenue level would be
$1 billion market cap, or potentially a
$2 billion valuation assuming they double revenue from FY23 (not FY24) over the course of FY25, which is fairly realistic for a 2 year period. This type of revenue multiple is obviously excessive, but quite common particularly in healthcare when the market begins to get overly excited about a fast growing company. Too hard to predict cash flows at the moment, I would rather wait for FY25 (when they expect to become cash flow positive) and use a revenue multiple for the time being.
It is worth also keeping in mind price tags of recent M&A of the space (both of the below occurred in 2022, a rather bearish time for healthcare stocks). The Hydrus device owned by Ivantis/Alcon is quite similar to iTrack Advance in terms of the fundamentals. iTrack Advance actually has longer term clinical data and many more patients treated at the time of the acquisition. That device was acquired for over $700m, and whilst take overs do tend to come at a premium to what you would see companies trade for on the market, it is quite an exciting sign that this is the right place to be in.
iSTAR is quite different to iTrack, but perhaps more compelling than Hydrus. This device wasn't even yet approved, it was still enrolling for the final study at the time of its acquisition. It was a late arriver in the more crowded stent market and there was zero evidence that it would even gain any traction in the market (still doesn't seem as if it has as I have heard very little in relation to it). Yet it still was acquired for an upfront payment of $90 (significantly higher than the current market cap of EYE), plus a huge $700m in contingent payments.
After these acquisitions occurred, there was an industry wide shift away from stents and towards canaloplasty. Partially driven by reimbursement changes which now significantly favour canaloplasty over stents, but also growing evidence of the high efficacy and safety of canaloplasty + the realisation that canaloplasty is a far more preferred option amongst patients when it comes to earlier intervention (stents and tearing can be quite daunting for fresh patients). iTrack is a first mover here, pioneering the canaloplasty space, and with its suite of patents protecting its unique features I would not be surprised to see larger players sniffing around here (iTrack Advance must look like a bargain compared to these other recent acquistitions).
I am not targeting a specific price though. Fair value today might very well look incredibly cheap in a few years (especially if 2RT really gains momentum). I am just looking at the current valuation, and buying based on the observation that this is far too cheap given everything we know. Regardless of what happens in the future, whether things continue the same as they are currently and this only ends up becoming $300m company, or whether things really kick off and this explodes into the billions of dollars, I feel like buying at these prices will get you a very good outcome either way (with the latter obviously being the preferred outcome). Just my view of course though...
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