1. why did the stock price decline from 80 to 53SEK?
2. how cyclical is the business? and do you have data about their main customers? (interested to understand if they are leveraged to a particular industry(s) such as auto, PC etc)
3. looking at the val, i.e. at 53SEK and EPS 2.23 (as at 2022 FY) it is trading around 22-25x PE. do you have insights or forecast on EPS for 2023 (or 2024) - do they normally provide earnings guidance?
4. are growth mainly organics or driven by acquisitions?
5. I note your comments that the business is asset light, however they have been buying competitors / factories. Trying to understand what happens after they acquire a new business? ie. do they shut down ops and then move manuf to Asia/outsource to Asia? therefore they only buy the client list?
1. Note that the day the fall occurs is the day they release the Q2 result. I think it is due to a decrease in sales of -6%. The funny thing is that EBITA increased by +5%. In the results letter they explain why. The truth is that I don't pay much attention to these short term movements, I just monitor if the price decreases and check the reason why. If the reason is temporary then I take an interest in the company I am following.
2. I don't think I have that detail. What I do know is that they focus on high-quality niche products so these instruments should suffer less. This year there is a stoppage in sales due to excess production capacity and the reduction in factory prices (hence the lower billing). Look in 2020 how they continued to grow by 18%, in 2021 by 52%, in 2022 by 38% and in 2023 they will decrease a little. From my point of view this is not a cyclical business but rather a high growth one and they are capable of absorbing high growth after high growth even improving EBITDA and EBIT margins.
3. I don't know how to tell you if next year will be good or not, but in 5 years I am confident that the company can grow that EPS by 15% CAGR in my base scenario.
4. 50% / 50%
5 .Notice that they do not buy producers, they buy companies similar to them "Traders", why? Because it is easier to reach a new customer through a company you have bought than to get a new one. They have the metrics and winning a customer can take years (buying a company too). I think they are betting on two levers to grow because they know that it is a medium-long term race. I don't remember well but only 10-15% of clients overlap when they acquire a new company so it is a profitable strategy.
The most important thing about this idea is that only this company and ICAPE are achieving this strategy. It doesn't look like anyone new is going to come in and disrupt because of the knowledge and reputation barrier to entry. Both NCAB and ICAPE are able to grow faster than the market (they steal share from their competitors) and also improve their margin year after year. That is a very good sign!
Super interesting company! Thanks so much for the detailed write up.
Thanks for the write up.
1. why did the stock price decline from 80 to 53SEK?
2. how cyclical is the business? and do you have data about their main customers? (interested to understand if they are leveraged to a particular industry(s) such as auto, PC etc)
3. looking at the val, i.e. at 53SEK and EPS 2.23 (as at 2022 FY) it is trading around 22-25x PE. do you have insights or forecast on EPS for 2023 (or 2024) - do they normally provide earnings guidance?
4. are growth mainly organics or driven by acquisitions?
5. I note your comments that the business is asset light, however they have been buying competitors / factories. Trying to understand what happens after they acquire a new business? ie. do they shut down ops and then move manuf to Asia/outsource to Asia? therefore they only buy the client list?
1. Note that the day the fall occurs is the day they release the Q2 result. I think it is due to a decrease in sales of -6%. The funny thing is that EBITA increased by +5%. In the results letter they explain why. The truth is that I don't pay much attention to these short term movements, I just monitor if the price decreases and check the reason why. If the reason is temporary then I take an interest in the company I am following.
2. I don't think I have that detail. What I do know is that they focus on high-quality niche products so these instruments should suffer less. This year there is a stoppage in sales due to excess production capacity and the reduction in factory prices (hence the lower billing). Look in 2020 how they continued to grow by 18%, in 2021 by 52%, in 2022 by 38% and in 2023 they will decrease a little. From my point of view this is not a cyclical business but rather a high growth one and they are capable of absorbing high growth after high growth even improving EBITDA and EBIT margins.
3. I don't know how to tell you if next year will be good or not, but in 5 years I am confident that the company can grow that EPS by 15% CAGR in my base scenario.
4. 50% / 50%
5 .Notice that they do not buy producers, they buy companies similar to them "Traders", why? Because it is easier to reach a new customer through a company you have bought than to get a new one. They have the metrics and winning a customer can take years (buying a company too). I think they are betting on two levers to grow because they know that it is a medium-long term race. I don't remember well but only 10-15% of clients overlap when they acquire a new company so it is a profitable strategy.
The most important thing about this idea is that only this company and ICAPE are achieving this strategy. It doesn't look like anyone new is going to come in and disrupt because of the knowledge and reputation barrier to entry. Both NCAB and ICAPE are able to grow faster than the market (they steal share from their competitors) and also improve their margin year after year. That is a very good sign!