Is Etherstack:

A) A business for whom all the planets are aligning with governments seeking to leverage their substantial IP for many years into the future, backed up by a substantially improved balance sheet, and relationships with heavy hitters across the globe including their teaming agreement with Samsung; or,

B) Essentially the same business it has been since it IPO'd in 2012 who has never made a profit and just happened to get a couple of things right in the past year to be able to forecast it's maiden listed profit in 2021.

On the one hand the high margins this company delivers suggests it's not a typical tender and contract business with limited moat, who can differentiate on price alone. It has a significant tailwind in terms of the 5G rollout, which is set to continue well into the back half of this decade. The ensuing maintenance contracts provide the promise of ongoing recurring revenue for the life of the networks and presumably Etherstack will be working on functionality to support the successor to 5G, with many big telcos/techs (Nokia, Ericsson, Huawai, Samsung, LG, Apple, Xiaomi) discussing the rollout of 6G. In addition Etherstack's satellite division has been working on functionality to enable emergency service/defense customers to have coverage in regional and remote areas.

On the other hand this is still the same company who IPO'd in 2012, has never delivered a profit and is led by essentially the same management team. You could describe revenues as lumpy but that gives an undeserved perception of the highs being better than they were and even the record 2021 forecast is sub-USD$9m.

I'm really not sure what to do with this one. They are quite prescriptive with how they see the next three or four years playing out in terms of opportunities and contract wins by year. If they deliver on what they say they'll do they're undoubtedly good buying around these levels (near 52 week lows). But they're around 50 times forecast earnings and almost eight times sales so if they don't deliver the reaction could be savage. They're definitely on the watchlist - I would need to do some more research and maybe hope for a bit more of a sell down before committing capital though.

Thanks to Rick for this one - your posts on this company prompted me to have a look.