The Disconnect On one hand, we have people claiming there is a huge disconnect between Reliq's potential and its current market cap. On the other hand, folks are claiming there is no disconnect and that the current price is expensive.
So, let's look at potential several years out. I'm not going to be conservative here like many, including myself, have been at times.
The company currently has under contract about 234 SNFs. Almost all of those deals have been signed in less than 6 months. Let's say they top out at 2k SNFs. Transitional Care Management revenue potential is about 70% adherence x 2k facilities x 100 patients per month per facility x US$60 per month per patient x 1.3 forex x 12 months = $131M. Let's further assume 70% convert to ongoing monitoring. After say 3 years of 2k facilities at full onboarding, revenue potential is say 70% conversion x 70% adherence x 2k facilities x 100 new patients per month per facility x 36 months x US$65/month per patient x 1.3 forex x 12 months less say 20% attrition = 2,862M. Now let's add something for say 500k non-SNF patients, which would be perhaps 70% adherence x 500k patients x US$65/month per patient x 1.3 forex x 12 months = $355M in revenue. Also, let's not forget Cognizant, which could add say another say $150M (or more) in revenue. This could lead to a potential stock value of $3,498M revenue x 10 price/revenue multiple / say 180M post buy-back shares = $194 per share.
Now, I'm not silly enough to suggest the stock price will actually go to that level, but I am silly enough to suggest that there is a huge, huge, huge disconnect between potential and the current market cap.
Those who are suggesting the current price is expensive are not really looking at potential at all; they're just looking at possible negatives, mostly based on the credibility of the company, especially in the two bottleneck areas. Regarding those, it seems they think there will either be little adherence going forward, or that collections won't materialize, or both. I suppose they could also be thinking Reliq will not be able to onboard many new patients or they might be overtaken by competition. For me, I do think the bottlenecks are abating. Furthermore, it is apparent the rate of contracting and the size of those contracts is going in the right direction, indicating a huge ramp ahead. And, there is no real evidence of the company's offerings being overtaken by anyone.
To me, investing is a matter of balancing probabilities. Of course we need further evidence of progress but, on the balance of probabilities, a 53 cent stock price seems cheap, cheap, cheap to me.
(By the way, there's no sense trying to pick away at my numbers. They're so large, it would be useless. Even if I'm out by a whole order of magnitude, the stock price is still very cheap.)