Outliers: LVGO and AudioEye (AEYE)

I normally don’t post more than once a month on this board, but I’m making an exception now, because it’s on a free article that’s about to go behind the SeekingAlpha paywall. And it’s probably one that most of you didn’t see, or maybe at best, skimmed quickly, because of the company that it’s about, QLYS:

Crushing It: Qualys Is A No-Brainer

But I don’t want to talk about QLYS. From what I can tell, it was briefly discussed once on this board, in Dec 2018 (https://discussion.fool.com/qlys-34095090.aspx?sort=whole#340950… ). If you’re curious, the first summary bullet point is: “A cloud security company with industry-leading performance including a 43% free cash flow margin.” Quite an improvement from the Dec 2018 thread! Okay, no more about QLYS in this post.

Anyways, I saw this article because I follow the author, Steve Auger, because he writes on SaaS names and always includes interesting scatterplots, and he shows where the company he’s discussing compares. This one has a plot on forward gross profits multiple vs. forward sales. Here’s the actual file, perhaps this will remain accessible even once the article is locked? If not, email me and I’ll send it to you.


First of all, I am highly skeptical about these numbers, and you should be too. There’s no way that ZM and TTD should have the same growth. I brought this up in the comments. He replied with:

I just pulled this from Seeking Alpha earnings tab. Revenue estimates for the next two years…I load up the charts on the weekend so my data would be from last Saturday and may not be reflective of estimate adjustments up to today. Also, the source of Analysts’ estimates may be different for Portfolio123 and Seeking Alpha.

So I checked TTD and ZM on SeekingAlpha, and the numbers do match what Steve says. Still not convinced at all. Saul has frequently warned about trusting numbers like this – who knows how old they are, or if they’re accurate, or where whatever bot got them from. Okay, so let’s be very wary of the numbers, and take a qualitative view of this chart, and look at the outliers. That’s all I really do with these anyways.

As expected, companies I own like ZM, DDOG, OKTA, and COUP are over-valued high-growth outliers. There are also three “unicorns” – undervalued outliers that are also high-growth: LVGO (my #5 holding), RUBI (aware of, don’t know much about), and AEYE (never heard of). This last one caught my attention, and here’s why:

The P/S seems to be around 5x, and the scatterplot above puts in the 45% growth cohort.

But I’m still very skeptical. So I looked it up. It’s a tiny (78M market cap) software company specializing in digital accessibility and ADA compliant solutions. https://www.audioeye.com/
In fact, it seems to have been discussed on this board waay back in its infancy, but by some familiar names (mekong22, GauchoChris, anthonyms):


I don’t really understand how anyone was buying it for $0.45 back in early 2015, when Google tells me it was trading for ~$9, and there haven’t been any splits or reverse splits. But whatever…
At this point, I’m still not thinking this is anything really worth looking into, let alone take up valuable real estate on this board with a post about it, but I am slightly intrigued. That 2015 thread above reminds me of the infamous Red Violet debates on here, and it smells of a fishy penny stock. So for one last Hail Mary, I did a plain old Google search. And apparently, less than 2 weeks ago, Zack’s updated it to a “Strong Buy”


[Or did they? This seems to suggest they’re only a “Buy” https://www.zacks.com/stock/research/AEYE/stock-style-scores… Obviously, I don’t know much about how Zack’s works.]

Oh, the irony of a name that I was about to forget forever, only to be saved by…Zack’s!!! Yes, we all know how “ratings” sites like Zack’s treat the stocks favored on this board. Remember when Saul said that his entire portfolio was rated C, D, and F, by some well-known group due to “valuation” concerns? So take it with a grain of salt. But, that said, their “strong buys” do outperform the market on average. Perhaps they’re comparable to a random Motley Fool Stock Advisor pick.

At this point, I’m intrigued by a small-cap company that has a low P/S and high growth, with the oh-so slight validation that Zack’s views them favorably as well, and it’s even been discussed on this board. And heck, could a company that works on ADA compliant technology get a WFH tailwind, with so many schools doing remote learning in the next few years?

So what did I do next? Something I’ve never done before. Email Bert. Just to put it on his radar, with the caveat that I haven’t done any research beyond what I’ve described above, so perhaps it can be dismissed in a few minutes. Maybe he’s aware of it, and there’s a reason it’s never appeared on TT. He wrote back tonight. Says he’s never heard about it, but will look into it. Of course, not this week, because of all the superstar earnings reports that are coming up.

So, what’s the point of this post? I mainly wanted to share what I found about AEYE, and see if anyone is familiar with it. Not really expecting anything. But most of the commenters of that 2015 thread are still active on here. Perhaps one of them has an update? And in the meantime, I’ll be enjoying earnings week, and will forget about this until I hear something more from Bert or get an update on it here. Finally, even though I’m skeptical about the data in the scatter plot, it is striking at just how much of an undervalued outlier LVGO is (or “was”, if the data is old). But if it’s a buy then, it’s still a buy now. Glad I own a decent amount of it.

By the way, if you haven’t already, sign up for Bert’s TickerTarget newsletter. Worth every penny.


AEYE was a penny stock Saul found that at first glance seemed to be a hidden gem. The board was very enthusiastic about it until someone discovered they were mischaracterizing their profits. That was publicized and they eventually were forced to make some changes but the stock languished. I was a plaintiff in litigation against them and received a small token payment - the lawyers got the real money. It sounds like they cleaned up their act and although I’m pretty sure the current price is after a reverse spilt a quick skim through the last earnings report actually seemed promising.