XF1 Valuations

Hi All,

It would be great to hear perspectives and opinions on valuations of XF1.

• 2016 revenue: $1.7m (overseas revenue = 1%)
• 2017 revenue: $4.1m (overseas revenue = 9%)
• 2018 revenue: $7.1m (overseas revenue = 13%)
• 2019 revenue: $10.1m (overseas revenue = 20%)

At the moment, with a share price of 44 cents, the company has a market cap of $74m.

XF1 thus trades on a PSR of 7.3x. This is quite lofty and will only continue to be justified if the growth rate remains intact.

The revenue growth rate across FY19/18 was 42%. Down from 73% in FY18/17.

The question becomes, can XF1 continue a 40% or higher top-line growth rate into 2020 and beyond?

The growth rate does seem to be slowing as the company scales, which is normal for SaaS companies, but if it continues, it could result in a fall in the revenue multiple.

At the moment, my assessment is that XF1 is perhaps a touch overvalued. It is certainly not a cheap stock given that it trades on 7.3x revenue. But, in today's market, investors are willing to pay a premium for growth.

Keen to hear other thoughts on the valuation.... buy, hold or sell?

T.E.P.