5/13/24 - $rpd - another look... can't buy it in this tape
5/13/24 - vrockstar -
RPD
- taking a closer look today on the move and this is a sickly looking move. while we might get a bid from current owners, what i struggle w/ here is the 7% revenue growth which seems "okay" and the mid 3's sales multiple on fwd ests. is also "reasonable" as well as the high teens PE ratio (assuming >2$ EPS this yr). but the issue comes down to "real" cash generation when you pull out stock comp. again my bias is to ignore it in co's that are compounding >15% but when you start hitting 10% or even lower - the stock becomes a payment mechanism no different than cash (these co's usually buyback the stock in the same amts they are issuing... so they're effectively the same thing). what this means is the 5% FCF yield while reasonable for B2B in the right zip code (cyber, growing, opex leverage seems to be playing out), isn't actually all that impressive until we get some obvious bid to smid cap risk assets. and while any bid overall should improve chances to trade/ and or mod your PnL size, any real drawdowns (of which we've not had a real one in recent memory) will show you what the market prefers - and i think the chart is already telling us this. while i'd not put it past this PE conglom to pump out a "take out" headline - and in which case congrats - that's your exit liquidity (along with theirs), i'd honestly need at least a sub 3x sales multiple and a high single digit FCF yield to become more interested. in which case, unfortunately i'm going to need to set the target nearly 25% lower to take a look. this is b/c the co is net debt, so you need an outsized equity move to really move the enterprise value. and that's probably high 20's (which we might never see - in which case i probably won't own it anytime soon), and i set the trigger at slightly above $30 to re-eval if/ when we go there if macro/ risk conditions have changed.
i'd stay on the sidelines here tbh or minimally have a smaller size and be nimble/ renting OTM c's for income.
RPD
- taking a closer look today on the move and this is a sickly looking move. while we might get a bid from current owners, what i struggle w/ here is the 7% revenue growth which seems "okay" and the mid 3's sales multiple on fwd ests. is also "reasonable" as well as the high teens PE ratio (assuming >2$ EPS this yr). but the issue comes down to "real" cash generation when you pull out stock comp. again my bias is to ignore it in co's that are compounding >15% but when you start hitting 10% or even lower - the stock becomes a payment mechanism no different than cash (these co's usually buyback the stock in the same amts they are issuing... so they're effectively the same thing). what this means is the 5% FCF yield while reasonable for B2B in the right zip code (cyber, growing, opex leverage seems to be playing out), isn't actually all that impressive until we get some obvious bid to smid cap risk assets. and while any bid overall should improve chances to trade/ and or mod your PnL size, any real drawdowns (of which we've not had a real one in recent memory) will show you what the market prefers - and i think the chart is already telling us this. while i'd not put it past this PE conglom to pump out a "take out" headline - and in which case congrats - that's your exit liquidity (along with theirs), i'd honestly need at least a sub 3x sales multiple and a high single digit FCF yield to become more interested. in which case, unfortunately i'm going to need to set the target nearly 25% lower to take a look. this is b/c the co is net debt, so you need an outsized equity move to really move the enterprise value. and that's probably high 20's (which we might never see - in which case i probably won't own it anytime soon), and i set the trigger at slightly above $30 to re-eval if/ when we go there if macro/ risk conditions have changed. i'd stay on the sidelines here tbh or minimally have a smaller size and be nimble/ renting OTM c's for income.