Today we have a very speculative idea: take stock of fintech software manufacturer Bill.com (NYSE: BILL), to capitalize on the growth of his business.
Growth potential and validity: 20% behind 16 Months, 10% per annum during 15 years.
Why stocks can go up: quotes fell, and the sector is promising.
How do we act: we take shares now by 139,32 $.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
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And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark: as with the investment idea as a whole, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
What the company makes money on
It is a payment management platform for small and medium businesses. How this software works, can be viewed in video companies.
According to company report, The company's revenue is divided into two segments:
- Subscription to the company's software and commissions for making payments - 85,4% proceeds.
- Interest income of the company from client money, held on the company's deposits, — 14,6% proceeds.
The company receives all its revenue in the USA., but she handles cross-border payments through Cambridge Mercantile.
Bill recently acquired rival company Divvy, which will increase Bill's revenue by 1.5 times..
Bill is currently unprofitable.
Arguments in favor of the company
Fell down, Yes. Bearing in mind that, how ruthless can T—J commentators be to ideas in the style of “waiting, when it falls ", I did not dare to immediately review this company with a recommendation to wait for the fall. I've been following these stocks for over eight months., until they finally fell in price by a quarter. Now we can take these stocks in anticipation of a rebound - which, probably, happens due to the circumstances described below.
Just growth, just promising. The company has occupied a good niche - automation of accounting for small and medium-sized businesses. This is very relevant during, when the coronavirus crisis fundamentally changes the way most enterprises operate, forcing the transfer of the maximum volume of transactions online.
At the moment, in annual terms through the company's platform, it is 121% - from the existing customer base it turns out to extract enough money, to cover losses from departed customers. In other words, given the high degree of predictability of the business, subscription-based, and then, that all newly acquired customers pay off in five quarters, the new owner will be able to cut down the costs of running the company in a reasonable time, leaving only those, who is working on the product. And get a working efficient business.
What can get in the way
Regulation. For transactions with payments, the company needs to have the appropriate licenses in different states of the United States and in other countries. A change in the rules and regulations in one of the regions may adversely affect the company's operations or lead to an increase in costs. For example, if there are legal changes, then you will have to reconfigure the software for them. Also, the company can ruin relations with partners from Cambridge Mercantile, and it will have to look for a new partner for cross-border payments. We don't know anything about other existing partners yet., so this is a significant risk factor.
Low rates. The company receives a significant part of its revenue in the form of interest income from deposits.. And it's not very good, because US rates are low these days: the corresponding item of the company's income decreased by almost five times. Basically, there's nothing wrong with that., as the company's subscription and payment business is growing and will continue to grow. But still you should keep it in mind.
Mahu dali. The company's target market in the United States is
