"Same sort of thing - early stage, some traction but not a...

"Same sort of thing - early stage, some traction but not a well-known company yet, some proving out to do but I've seen you guys comment on stocks like this in the past so would be interested to get your take. "

@JamesRS

All true, but you've omitted to mention the one most relevant piece of information, viz. valuation. Unlike some of the other "inflection point companies" on which I've posted - whose market values were measured in tens of millions of dollars, NXS is already a $400m company.

So it is already pricing in a significant amount of future Revenue accrual.

Don't get me wrong; this is more than just a conceptual company; they clearly have real products for which there appears to be a real need, and the potential addressable market for their existing and approved product range is large. And with the product development pipeline, I expect that they will have plenty of positive announcements to make to the market over the next 12 to 24 months.

So, it is likely to be a stock price that is driven by announcements and news flow.

But if you set the announcement-arbitrage opportunity aside, making an investment case based on valuation grounds is, I find, difficult to do because, based on my rudimentary modelling, to justify the current share price requires a revenue run rate of some $90m [*].

The forecasts risks of any such a "start-up" company with limited operating or financial track record is high, but for what its worth my stab at a prospective P&L and Cash Flow statements are as follows:




Again, don't get me wrong: there is a market for, and this company certainly looks like to has the capability to, generate $80m in sales revenue (and more). The question is merely how long it will take to get there.

Based on the above rough modelling, which provides for quite an aggressive compound annual growth rate, it could be there by 2022. Which is some way off, and a lot can happen between now and then.


So, in summary:

I think the stock price will be driven by announcements relating to new product developments and approvals (and there are likely to be a number of those in the coming 12-18 months). But I cannot make a case for owning the stock on any fundamental valuation basis at this stage.



[*] Assuming long-run GP Margin of 85%, and CoDB-to-Sales of 40% (not atypical of a business generating circa $100m in sales on a global basis), which yields EBITDA and EBIT of ~$40m, and NPAT approaching $30m (corresponding to EPS of ~15cps to 16cps)
.