This may be something to keep an eye on when Stealth report next and could be a concern. There was a major change in their trade and other receivable's vs trade and other payable on their balance sheet in FY23 vs FY 22.

In FY 22 accounts receivables were $18m vs accounts payables of 18.6m, a $600k difference

In FY23 accounts receivables were $17m vs accounts payables of $21m, a $4m difference.

So they owed $4m more than what they were due to receive at financial year end. This would have skewed the cashflow to the positive when taking into account the money owed versus what is due.

Just something I am watching.

Nice article on Stealth for anyone interested

https://www.sharecafe.com.au/2022/04/14/stealth-breaks-out-from-under-radar/

Thanks for the Stealth presentation today Andrew. I agree with DrPete123 that Mike came across well and genuinely.

When valuing a business like this I like to look at the enterprise value and add debt onto the market cap. Debt is sitting at $10m but Mike indicated that could be reduced by $3m, so I will assume $7m in total. So a market cap of $11m plus $7m gives an enterprise value of around $18m. For a profitable growing company with a revenue run rate of +$100m and looking to grow to $200m by 2025, achieving a NPAT margin of 5% would justify a $80m valuation and an $0.80 cents share price. Assuming a 10x enterprise value as I am assuming they will need more debt to fund acquisitions.

One of my main concerns is the number of employees the business employs in a wage inflationary environment and their ability to pass on price increases to their customers. This is probably one of the reasons for the extremely low valuation, together with the risk of a roll up strategy. Overall I believe the margin of safety compensates me for this risk and this is why I own shares in this business.