Post by
retiredcf on Jan 11, 2024 6:35am
More Exposure
Vitalhub seems to be doing a lot of things right. CEO Dan Matlow knows this space well, based on my conversations with him a few years ago. It's business is primarily in the UK but it is making some inroads in Ontario. How does one go about evaluating this business: what comparable companies and what ratios etc do you use?
For VHI, two comparable Canadian companies could be WELL and KSI. Software companies typically use earnings and sales multiples as the basis for valuation. For VHI an investor could use forward price-to-earnings (28.9x) and forward price-to-sales (3.1x). WELL has a forward price-to-earnings at 13.6x and forward price-to-sales at 1.0x. KSI has forward price-to-sales of 5.6x while forward price-to-earnings is not available.
and overall.....
VHI has started to display some nice mometum following multiple solid quarterly results. EPS forecast predicts growth above 40% in the next two years, while revenue growth will be ~11% in each of the next two years. We think VHI looks solid while having decent cash on its balance sheet and the outlook appears positive. It is expensive at 28.9x forward-earnings due to the 47.6% jump it has taken in the last year. But we think it is doing many things right and is developing nicely as a decent small cap stock, with no debt, $30M cash and solid momentum. (5iResearch)