A Cheap and Growing Microcap with a Huge Pile of Cash
2.4x EV/FCF. 80% of market cap in cash. No debt.
Key Metrics:
2.4x EV/FCF
Asset-light business model
80% of market cap in cash
No debt
High margins
Consistently profitable since 2010
Anytime you’re offered a stock at 2x EV/FCF, with nearly the entire market cap in cash, you have to ask yourself:
How did I get so lucky?
You see, for some companies, such a valuation might actually be fair.
It could make sense for a shrinking business with poor management that constantly dilutes shareholders.
Or for a busted biotech that raised a lot of cash and is now burning through it day by day.
But for a profitable, high-margin, and even growing business?
That kind of valuation is absurdly cheap.
But the valuation alone is not the whole story.
The business itself has several additional features worth highlighting.
It operates with an extremely asset-light model and requires virtually no capex, meaning that almost all net income converts directly into free cash flow.
Margins are already strong, yet they continue to expand as the business grows, resulting in EBIT compounding at an impressive 24% CAGR over the past four years.
On top of that, the balance sheet is loaded with cash and completely free of debt, providing a substantial margin of safety to an already attractive opportunity.
When you combine all of this with aligned management that returns cash to shareholders, grows the business, and isn’t diluting shareholders, things start to get very interesting.
So let’s take a closer look.