How does a smart investor defuse some of today's macro uncertainty? One way is to park more money in the bank - albeit interest rates are near zero, and cash doesn't protect against either inflation and/or a currency devaluation.
Another approach is to look for deeply undervalued software firms with overseas exposure, high recurring revenues and wide competitive moats. We think one such cloud enabled SaaS stock is Big Data expert Rosslyn Data Tech. Indeed its cutting edge supply chain focused data mining, analytics and artificial intelligence platform (RAPid) actually saves corporates a ton of money. A key customer benefit in the event of another recession.
Moreover with 80%+ gross margins, 5% churn and rich EBITDA drop-through rates - a large chunk of any future incremental turnover should fall straight to the bottom line.
Hence given the strong fundamentals, we reckon the company will become cashflow positive this year on revenues 12% higher at £7.8m (vs £7.0m LY) and is worth 12p/share. Representing a forward EV/sales multiple of 1.7x, and equivalent to an unjustified 75% discount to peers at 6.7x.
Finally in light of its scalable technology, we suspect Rosslyn could ultimately even become a takeover target, reflecting the voracious appetite of overseas buyers for UK plc. CEO Roger Bullen adding: We are confident of continued growth as we engage in numerous large client opportunities that we hope to be able to announce later this year.
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