Firstly - hello all, I have been a lurker for some time on this board but this is my first post. I would like to thank Saul and all the other great posters for sharing their wisdom and teaching me so much.
I have read the posting guidelines and understand the type of stocks this board looks at (high growth, great companies) and that you do not look at “value investing” stocks or anything like that. But please bear with me for one moment, as I do believe the following company could in a year or so start to be a relevant company, altho I agree the growth at the moment is masked by a slow/declining legacy business.
I wanted to ask whether members had looked at Software AG (ticker: SOW, German listed).
They own legacy software to do with on-prem database monitoring, typically for financial institutions and industrial companies. This stuff is moving to the cloud and their databases are oldfashioned, so the business is declining.
But what is exciting is they are also a, if not the, market leader in IoT software. The core product is called Cumulocity. The company has been recognized by Gartner as a Visionary for enterprise Integration Platform as a Service (eIPaaS) and Industrial Internet of Things (IIoT) (Cumulocity, TrendMiner, Apama and Zementis) and as a Leader in Full Lifecycle API management (webMethods), and Enterprise Architecture Tools (Aris and Alfabet). Furthermore, Software AG has also received the highest Critical Capabilities scores by Gartner for all IIoT use cases. They also have a product called Terracotta
This segment is growing revenues at 50-60% p.a. and accelerating. It currently only represents 5-10% of SOW revenues. But if the pace continues, it could be 50-60% of revenues by 2023.
They hired a new management team in 2019 who are incentivised specifically on revenues linked to new use cases, and revenues linked to new customers. So management will be very focused on developing the IoT side of the business.
The stock is very cheap for a software name (2-3x revenue), obviously because the high growth business is small today. But the multiple expansion combined with growth could potentially make this a winner if it takes off.
I wondered whether any of the technical whizz-kids out there could comment on whether this IoT really is market leading?
My apologies if this is not the right board to discuss this idea. Hopefully you will see my rationale from the above, as to why I thought it might be relevant, even if you decide it is not.
And thanks again to everyone for sharing all the great knowledge with a simple investor like me!
–exfortisd