GEO Investing

We found another stock nearing an inflection point where impressive returns can be generated. I remember the first time we noticed the stock. At that time, the CEO of the company was retooling his business plan for aggressive growth, but we knew it would take time to realize the potential.

I conducted a quick 30-minute phone interview with him from my hotel room while attending a microcap conference.

His story got me excited enough to want to buy a starter position in the stock and share my initial thoughts with GeoInvesting’s Premium Subscribers. So, I published my interview notes. However, I and my team recently expanded our research coverage on the company and are more bullish than ever.

When we first started talking about the stock only a few weeks ago, it was one third of the price it is today. The stock was trading at a meager price to sales (P/S) of around 0.5 and a price to earnings multiple (P/E) of 10, even though it just grew over 30% in its last quarter. If the market were to assign a typical P/S multiple that other growing software businesses trade at, we said we could see shares rising over 600% from its current price. Well, it’s already tripled. But we obviously don’t think it is done.

On the surface, the story is bit complicated to understand, a reason why we think the stock is only slowly reacting to recent developments. However, once the dots are connected it becomes quite simple.

What we have here is a typical turnaround story where the company is doing things to accelerate its growth, make revenue more predictable, and clean up its balance sheet which tends to result in very swift increases in the price of a stock once investors realize the story is not as risky as it once was (de-risking).

We think we are bringing you this story at a very timely point in the company’s turnaround story which we are betting will be found by the market at any time now. The last two stocks we identified that were going through de-risking transformations climbed 707% and 220%. Ultimately, we think that our current stock pick will exceed the returns of these two other turnarounds.

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