AYX has $182m of revenue in the last 12 months. TLND has a little more: 190m. But AYX is a $3.8b company (PS just over 20) and TLND is a $1.2b company (PS of about 6.5). Seems like TLND is super cheap and AYX is crazy expensive, right? However…
Growth rate is everything.
If AYX grows 55% they will have 282m in the next 12 months.
If TLND grows 20% they will have 228m in the next 12 months.
Wow. Makes quite a difference. And that’s just one year. The next year…
AYX at 50% (slowing down) would reach 423m. TLND at 25% (speeding up) would only reach 285m.
Ouch! And on and on it goes. TLND could never catch up! Even if TLND accelerates back up to 40% (I warn you — don’t bank on this!) in a couple years and AYX slows down to 40%, AYX would reach 592m and TLND would only hit 399m. TLND would just get further and further behind.
Not to mention, AYX is already showing a profit, and TLND despite the revenue slow down is maintaining their intent to “invest” in expansion.
I too have fallen into the trap of saying, “the PS is so low, it must be a steal!” Don’t be fooled. You’re betting on better days in the future, which may never come. But even if they do, it could still be the case that your value play turns out to be a value trap.