Incredible analysis, Saul. I’m continually in awe of your focus and clarity of thought. I had all the information I needed to put all this together, but until you did I had completely failed to see it this way. However, I will venture to add something on valuation.
As you said, this company has recognized 184M of revenue in the last year. At a market cap of 650M, that’s a PS ratio of roughly 3.5 – ABSURDLY low for a company growing this fast. However, that’s only the half of it, because as you pointed out, the actual billings this year were 270M. Comparing the market cap to that run rate yields a price-to-billings ratio of an even MORE ABSURDLY LOW 2.4.
I just feel the need to point out that this is the same world where SPLK and PAYC are growing possibly slower than HDP but have PS ratios over 9. Maybe another way to say what I’m trying to say is that HDP shares would have to almost triple to have a PS over 9.
Then there’s the profitability issue but the fact that they came through on their promise of EBITDA break-even is a strong signal in the right direction.
Wall Street is usually pretty smart, but this company does kind of defy traditional valuation. I think it’s severely undervalued and I’m loading up. I’ve also taken a small position in TLND, another company that works with HDP and which Bert has written about.
Bear