Valuation
- Company will continue its trajectory of 10% top line growth p.a. with possibility of more aggressive growth should new business materialize (e.g. data monetization or making the app medical device for sleep apnea) .
- Business is scalable and should return good margins expected to improve over time between 25-30%.
- Reasonable PE ratio, given expected growth potential and good revenue model (negative net working capital).
Catalysts
- New Business models based on the company's existing data and software, e.g. making it a medical device for sleep apnea, selling data, or sellings its software as SDK.
- Macro trend driving growth - general increased awareness of sleep as an essential part of well being.
Assumptions
- I assume that the company can maintain its historic growth trajectory of 10% p.a.
- I assume that the net profit margin can improve as the company scale to a range of 25-30%
- I assume that no material M&A will be performed and that 50-60% of net profit will be distributed as dividends.
Risks
- Larger player like Apple or Samsung making a decisive move to capture the sleep market pushing out the Company.
- General downturn in application downloads continuing and also dragging down company's app, along with its topline.
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Disclaimer
The user Mandelman has a position in OM:SLEEP. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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