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13/10/22

18:32

Post #: 64186693
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Originally posted by patyccc ↑

Accel-KKR were the early proponents of the 'Rule of 40' -> ARR growth rate plus your EBITDA margin. Above 40 is a quality business, below 40 is not so good. Above the line companies command a premium from a valuation perspective, below the line companies are discounted.

ELMO sits just below the line (c.30% ARR CAGR, nothing from EBITDA) with some obvious areas for improvement to get above the line. Growth levers for a control buyout shop like AKKR would be revenue growth, cost-out to achieve EBITDA breakeven, and focus on gross retention and net retention. Net retention at just over 100% would be a massive opportunity for an AKKR type.

All of this to say that you're unlikely to see another $6 bid, but something in the $4's feels about right

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Good context, appreciate this.

Still hold the view it wouldn't go for less than $6... but time will tell I guess given how high that sits vs current SP

ELO Price at posting: $3.09 Sentiment: Buy Disclosure: Held
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0 Great analysis

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