Forum Topics BTH BTH Recent Downtrend
BoredSaint
Added 3 years ago

@TycoonTerry

I did a similar analysis on Nitro Software (NTO) a few days ago. I believe the recent downtrend is more related to a general re-rating in these non-profitable growth companies. Now I know not everyone likes to use a P/S for analysis but for these companies that have negative earnings and not yet cash flow positive yet then its a good start I guess for analysis.

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Above is the PS ratio for BTH since IPO. As you can see the historic trading range is between around 4-8x revenue before a re-rate upwards occurred post-covid dip when there was extra stimulus. With the recent fear of rising interest rates and inflation, many of these types of companies have re-rated back to pre-covid multiples.

I too am bullish about the long term prospects of this company and feel the current downtrend is being overplayed and so its good to see management buying at these levels. I too recently added at around 69c a share IRL. I have them trading at a fwd P/S of around 3.5x (if they meet guidance). I feel this represents good value for a company growing its revenue at over 30% (organic growth) and are now starting to integrate its acquisitions onto their main platform (Watch the investor Product and Technology Event from today). The last quarter was also operating cash flow positive.

I guess the counter-thesis would be that the company remains unprofitable and continues to burn cash and raise capital which may be difficult in a "bear" market and rising interest rate environment.

Disc: Held IRL and on Strawman

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AUROPAL
Added 3 years ago

The re-rate seems particularly harsh on cash burning growth stocks. My growth stocks which are profitable haven't fared as badly (although still down heavily) but every unprofitable company I own has been massively smacked (BTH, DUB, CAT, etc), leading my portfolio to be down around 25% since last September highs, despite the fundamentals of the businesses going in the right direction.

In the end seems to really be about market sentiment and as is said, in the short term the market is driven by sentiment.

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