Xebec and Greenlane have virtually the same number of shares outstanding.
Xebec has 154.7 million. Greenlane has 150.3 million.
Today Xebec is capitalized at $32 million more than Greenlane.
Xebec's Q1 revenues were up 100% to $41.2 million.
Greenlane's Q1 revenues were up 33% to $16.3 million.
Xebec's backlog is $260 million.
Greenlane's backlog is $35 million.
Xebec has working capital of $66.6 million.
Greenlane's has working capital of $29.2 million.
Xebec trades at .91 X trailing 4-quarter revenues.
Greenlane trades at 1.77 X trailing revenues.
Xebec is trading at .465 times book value.
Greenlane trades at 1.89 times book.
Despite these facts, the analysts' mean target for Xebec is $1.94, while the mean target for Greenlane is $2.46.
The highest target for Xebec is $3.00 while that of Greenlane is $4.00.
The low target for Xebec is $1.40 while the low for Greenlane is $1.68.
I think the analysts have it backward, and very obviously the market thinks so too.
Xebec had a 31.5% dead-cat bounce in 5 trading days from its low on June 14th at $0.73 to its high on June 21st at $0.96. Now its settled down and is showing excellent relative strength trading 19% above its low, while the markets are making new lows.
Greenlane hasn't even had a dead cat bounce and has yet to close above $0.70 after making its low at $0.65 on July 5th. It hasn't even traded above $0.70 once since then.
Greenlane hasn't traded even once more than 7.7% above its low versus Xebec's initial 31% bounce.
Right now, at $0.68, Greenlane is trading only 4.6% above its low.
But why are the analysts more optimistic about Greenlane?
I believe it's because Greenlane hasn't burned them like Xebec has.
The high on Xebec was $11.55, and the high on Greenlane was $2.96.
And why was that the case?
It's because none of the stocks in the sector were profitable when they all peaked in unison, and as a result, they were being valued to an extent on the basis of revenue multiples.
When Xebec peaked in January 2021 at $11.55 it was trading at 32 times 2020 revenues.
Greenlane peaked in February 2021 at 19.8 times 2020 revenues.
The greater the revenues the greater the impact on market cap contracting revenue multiples will be.
A company with $100 million in revenues will lose $500 million in market cap if multiples go from 10X to 5x.
A company with $50 million in revenues loses $250 million in market cap.
The reverse of this phenomenon is also true in periods of rising revenue multiples, these multiples being primarily determined by sentiment. The very same sentiment that always has and always will experience wild swings in the markets.
Not only have the analysts got the Xebec story entirely wrong, and not only have they sought safety in numbers with only a couple of exceptions, but not a single one of them has considered the possibility of this group returning to favor and once again enjoying rising sales multiples.
It may seem ludicrous to point this out, but it's a fact that if Xebec traded today at the peak revenue multiple it reached on January 18th, 2021, it would trade at $29.80.
That's a fact, but if you want to debate it be my guest.
The point here is about swings in market sentiment.
The strong and the steadfast holding Xebec here will be very richly rewarded.