Trading at 4x 2017 EBITDA and 3x 2018 EBITDA…Time for the next move higher, now that we have consolidated for a couple weeks and the fast money traders have moved on and a focus can be put back on fundamentals.
I would just point out a couple things;
As gross margin continues to recover by increasing for 5 consecutive quarters QoQ, all the way back to 78% this profitability is pulled right down to the bottom line and leads to increased operating leverage for each incremental dollar of revenue.
Bad Debt- If you take the trailing 4 Qs of bad debt of 24% (31.2M) of revenues and now it will be brought down to the 8-10% range brings in incremental EBITDA of 18-20M dollars just on bad debt improvement.
So all in all, with Bad debt improvement combined with gross margin expansion and revenue growth I can make the case for 20M in 2017 EBITDA and 30M in EBITDA in 2018. PHM will not be trading at 3x EBITDA for long when they will be growing EBITDA 50% with a reoccuring revenue stream.
PRICE TRAGET: 6-8x ’18 EBITDA gets me to 0.48-0.64/share or more than 100% upside at the midpoint.
LONG