Good morning,
Today I’m pitching a founder-led small cap that the market has decided is broken.
The company fell 18% on Tuesday after H1 results showed slowing organic growth, weak cash conversion and rising debt to fund acquisitions. These concerns are real, and I address each of them below.
But today’s price assumes something much harsher than the results show. After stripping out management’s adjustments and deducting the real cost of employee incentives, I estimate the market is paying under 12x normalised free cash flow. That price implies little to no growth for the next decade.
Meanwhile, this company is capital-light, high margin and still led by its founder, who owns more than 20% of the company. Even assuming no further acquisitions, little help from AI and just 3.5% annual growth, I arrive at a fair value at least 35% above the current price.
Let’s dig in…
