seekingalpha.com posted an article yesterday entitled “Livongo: Not As Expensive As You Think”.
link here: https://seekingalpha.com/article/4357679-livongo-not-expensi…
Note the author states they’re long LVGO, so filter the data in the article through that lens. I found the article interesting and wanted to see if the findings were reasonable. The article asserts that, on the surface, while Livongo looks very expensive with a P/S of 45, (as of yesterday), looking forward it’s not as expensive.
Please follow my analysis (I invite feedback)…
Q1’20 LVGO revenue = $68.8M
LVGO revised their Q2’20 revenue forecast to $86M to $87M. If we take the lower end of the range we get 1H20 revenue = $154.8M: (= 68.8 + 86)
So to hit the analyst’s estimate of $313.1M would require LVGO’s 2H’20 number to be ~$158.3M or just ~$79.2M per quarter, which represents a sequential ~9% decline in revenue, from Q2 revised numbers…
So given LVGO guided Q2’20 to ~$86M to $87M suggests the $313M ’20 revenue forecast is very conservative, likely an easy beat.
So let’s do some modeling to estimate what the actual '20 revenue might be:
Assuming 20% sequential growth for Q3’20 and Q4’20, (down from the 26% Q1’20 to Q2’20 sequential growth), results in an annual revenue in the neighborhood of $384M, which would represent a 23% beat to current analysts recommendations of $313M for '20.
The article makes some price to sales comparisons which you can read. I’ll make some different assessments, modelling a growing share price, starting with forecast of $384M for '20 revenue. See table below
Year YoY Growth Sales($M) %change in YoY growth from previous year Price per share P/S
2020 108% $384 baseline $106 26.8
2021 86% $715 -20% $200 27.1
2022 69% $1,209 -20% $300 24.1
2023 55% $1,877 -20% $400 20.7
2024 44% $2,707 -20% $500 17.9
Now this data assumes a constant share count but it also assumes a modest YoY growth rate decline of 20% per year. So while the annual revenue is growing, the rate of growth is declining by 20% per year, if that makes sense. The data suggests that LVGO share price could approach $500 per share and achieve a Price to Sales ratio of about 18, given the assumptions of the analysis above. Note this is a “back of the envelope” analysis for entertainment purposes and not comprehensive of all the dynamics of the company or external factors. You are welcome to prepare your own analyses to quantify the attractiveness of LVGO.
I hope you find this data useful.
Gary
Long LVGO