Since 2011, our members have profiled 200+ multi-bagger stocks. This equates to over 1 multi-bagger profiled per month since 2011.
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Peter Lynch said: “The person that turns over the most rocks wins the game”
MicroCapClub is the best in the world at turning over the rocks in microcap. Every month our members profile 5-15 global microcap ideas.
Since 2011, our members have profiled 200+ multi-bagger stocks. This equates to over 1 multi-bagger profiled per month since 2011.
The MicroCap Idea Newsletter is a once per month newsletter which provides you with a summary thesis on all the microcap ideas that were profiled during the previous month on MicroCapClub.
The microcap ideas cover all flavors of investing, ranging from deep value, growth, GARP, and special situations. Most of the ideas trade on United States, Canadian, European, and Australian markets.
The microcap ideas mentioned in the newsletter are NOT stock recommendations. If you want to lose money, buy all the stocks mentioned in the newsletter.
The newsletter is meant for idea generation. Look through the ideas and dive into the ones that connect with your strategy.
As this newsletter matures the real power will be in the database and archive of ideas. You will be able to access the full archive of newsletters and ideas at any time. We already have the two past monthly newsletters in the archive with 40 ideas.
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What will the newsletter look like? Here is an example:
All great companies started as small companies. Let’s turn over the rocks and find them. The following microcap companies were profiled by members on our community during July 2023. As a reminder, these aren’t stock recommendations. The purpose of this monthly newsletter is to be an idea generator and a starting point for due diligence. Every month, look through the ideas and dive into the ones that connect with your strategy. To view the full investment thesis on each idea, follow company discussions, contact the authors, join our community.
GARP: Telesat Corporation (TSAT) by @Scamandrios
Stock Price: 8.40 / Market Cap 114M
Revenue: 756M TTM; EBITDA: 503M TTM
Cash: 1.71B; Debt 3.87B
Telesat, a global satellite operator, has made significant advancements in satellite technology and connectivity. Its Lightspeed program offers higher capacity, reduced latency, faster speeds compared to traditional satellites, and is 36x closer to Earth. With 39% of the world lacking access to affordable high-speed internet, Telesat is well positioned to improve global connectivity in a market expected to triple in size. The company's stock has faced challenges, including passive investor selling pressure after removal from certain indices and uncertainty around LEO delays. However, the company's potential is significant, with estimated revenues of $700 million this year and a backlog of $1.7 billion. Conservatively, the primary portion of Telesat could be worth $1.1 billion. LEO satellites have a large addressable market, and even conservative estimates suggest significant potential value for Telesat in the future.
Deep Value: Anexo Plc (ANX.L) by @JamesE
Stock Price: 60.0 / Market Cap 70M
Revenue: 138M TTM; EBITDA: 31M TTM
Cash: 9.05M; Debt: 82.1M
Anexo is a British small-cap credit hire and legal services business, potentially the market leader. Its business model includes vehicle credit hire (EDGE) and legal services (Bond Turner). The legal segment focuses on road traffic accidents where claimants are not at fault, allowing Anexo to charge elevated credit hire prices and recover costs from the at-fault insurer. Anexo also handles housing disrepair claims and vehicle emissions claims. The company generates significant receivables from creditworthy insurance companies. With strong returns on investment and potential for margin expansion, Anexo offers a compelling investment opportunity, trading at a significant discount to its true value. The company's diverse revenue streams and durable earnings make it an attractive option for investors, with considerable potential for share price appreciation.
GARP: Electrovaya (ELVA) by @chickenparm
Stock Price: 4.00 / Market Cap 130M
Revenue: 32M TTM; EBITDA: -1.4M TTM
Cash: 553K; Debt: 19.1M
Electrovaya Inc. is a disruptive player in the lithium-ion battery space, offering safer, longer-lasting, and cost-efficient batteries for materials handling. Partnering with Toyota's Raymond subsidiary and serving prominent customers like Walmart, Target, and P&G, ELVA is positioned for accelerated adoption. Growing at 100% and already profitable, the stock's valuation at $170M appears attractive compared to peers like EOSE and ENVX. Trading volume and investor awareness should expand as revenue ramps, along with potential analyst coverage from Evercore. ELVA aims to secure a government grant of $40M to scale its new facility and upgrade its debt facility, supporting further growth. While risks exist, including liquidity, balance sheet, dilution, and execution risks, ELVA's strong potential for multi-bagger growth makes it an appealing investment with a year-end target price of $7.
GARP: Kistos Holdings (KIST.L) by @StefanWinterToo
Stock Price: 245 / Market Cap 203M
Revenue: 411M TTM; EBITDA: 375M TTM
Cash: 211M; Debt: 82M
Kistos, a European E&P company, offers a compelling investment opportunity with its low-carbon emission assets in the North Sea and remarkable unit operating costs of around $7/boe. Managed by a proven team with significant ownership in the company, Kistos holds a competitive edge in the industry. The current market opportunity exists due to recession fears and low sentiment in the European O&G sector, leading to a discounted valuation compared to peers. European nat gas prices and political uncertainties contribute to this opportunity. Despite these challenges, Kistos is expected to grow, especially with the phase-out of local production capabilities and rising LNG import capacity, which will lead to higher gas prices in the long term.
With its impressive assets in the UK, Netherlands, and Norway, Kistos has expanded into oil with the recent acquisition of Mime Petroleum. The company's strong management, track record, and 2P reserves of over 36 MMboe, alongside 70 MMboe of 2C resources, provide compelling value at the current price of $6.80/2P. Conservative assumptions still result in substantial upside, making Kistos a promising investment prospect. The risks include potential negative tax changes and operational challenges, but the overall value proposition and optionality outweigh these concerns.
Value: Medical Facilities Corporation (DR.TO) by @JBermejo
Stock Price: 9.26 / Market Cap 238M
Revenue: 433M TTM; EBITDA: 72M TTM
Cash: 35M; Debt: 138M
Medical Facilities Corporation is an attractive investment prospect due to its shift in management strategy whereby the new team has halted historically unproductive acquisitions, divested non-core assets, and prioritized share buybacks using excess free cash flow (FCF). Valued at around 5x FCF, the firm operates in the healthcare sector, owning surgical hospitals and ambulatory surgical centers. Its strong position in an aging US population market generates consistent demand for healthcare services. Notably, physician and patient loyalty contribute to the success of its facilities, with high-quality services and comfort setting them apart. The recent change in management has led to a share repurchase program, boosting the company's stock. Despite temporary setbacks due to accounting issues and external factors, normalized earnings reveal a positive financial outlook, making the stock a promising investment with substantial FCF generation over the next few years.
Special Situation: Mitek Systems (MITK) by @JacksonPeak
Stock Price: 11.70 / Market Cap 528M
Revenue: 143< TTM; EBITDA: 30M TTM
Cash: 90M; Debt: 135M
Mitek Systems, a digital identity and fraud prevention software solutions provider, has been undervalued due to concerns about delisting risk and financial accuracy since May 2022. Despite consistent profitable growth and a strategic position in fraud prevention amid increasing AI-driven fraud, the stock has been discounted. Recent developments, including the appointment of a new auditor and preliminary financial reports, indicate resolution of delisting risk. MITK's FYE 2022 financials are expected to be filed within weeks, paving the way for institutional investments.
Mitek's financial profile boasts a lucrative identity verification segment and a near-monopoly in mobile check deposit. Its identification verification solutions have rapidly grown, supporting multiple industries' security needs. In FY22, the company achieved record revenue with substantial growth and solid margins. However, the overhang of delisting risk has kept the stock trading at a significant discount. With a favorable environment for identity protection and fraud prevention, MITK is well-positioned.
Considering historical multiples and conservative estimates, the removal of delisting risk could lead to a 50% stock price appreciation by the end of August. Moreover, looking ahead, the potential for 100% upside within a year is plausible, supported by sustained growth and evolving market dynamics.
Value: Reckon Limited (RKN.AX) by @danzs
Stock Price: 0.51 / Market Cap 57M
Revenue: 51M TTM; EBITDA: 5.8M TTM
Cash:1.2M; Debt: 6.4M
Reckon Limited is a stable slow growing microcap business that has a history of shareholder friendly liquidations which could continue in the future. The company is an attractive investment proposition for several reasons. First, the company is undervalued compared to its peers, trading at 3.2x EBITDA compared to a similar business recently sold for 8.4x. Second, RKN has a new cash incentive plan that aligns CEO interests with shareholder interests. This plan is activated upon returning around three times the current market cap to shareholders, which provides a strong incentive for the CEO to maximize shareholder value. Third, RKN has a loss-making division that could be sold or turned around, which would boost profitability by 60%. The company is undervalued today, has a new cash incentive plan that aligns CEO interests with shareholder interests, and has a loss-making division that could be sold or turned around.
GARP: Propel Media (PROM) by @Tim Eriksen
Stock Price: 0.24 / Market Cap 60M
Revenue: N/A TTM; EBITDA: N/A TTM
Cash: N/A; Debt: N/A
Propel Media (PROM) is an illiquid stock traded on the expert market with around 252 million shares and a recent price of $0.24 per share. In April 2022, Propel decided to sell its primary business for a $24 million note receivable, focusing on healthcare advertising via DeepIntent. An unforeseen acquisition by IQVIA Holdings (IQV) for $700-800 million was reported in May 2023, valuing PROM at $2.77-3.17 per share. The FTC's legal action against the acquisition introduces uncertainty. Potential outcomes include court approval, completing the deal, or FTC blocking, leading to an independent valuation. Although financials are undisclosed, estimates suggest DeepIntent's robust revenue growth from $831K (2017) to $146M (2023E). Even if the IQVIA deal fails, PROM's low market cap and potential earnings make it an appealing investment, considering its growth prospects and valuation.
GARP: Esautomotion (ESAU.IT) by @Abacus
Stock Price: 4.56 / Market Cap 58M
Revenue: 34M TTM; EBITDA: 7M TTM
Cash:11M; Debt: 288K
Esautomotion is a B2B player in the CNC market, specializing in software, hardware, motors, and drivers for automating industrial production machines. With a solid track record since its 2018 IPO, it has achieved robust growth (CAGR 2012-2022: +15.4%), profitability (25% EBITDA margin in 2022), and internationalization (80% sales outside Italy). The recent acquisition of Sangalli Servomotori reflects ESAU's vertical integration strategy. Positioned to benefit from low penetration rates of automated machines in developing countries, the global trend toward production automation, and protectionist industrial plans, ESAU is poised for growth. Their competitive valuation (7x P/E 2024, 4x EV/EBIT 2024, 3.4x EV/EBITDA 2024 compared to peers) suggests potential 150% upside in the next 12 to 24 months. A diversified customer base, global expansion, and strategic acquisitions further support this positive outlook in the CNC market.
GARP: Transense Technologies (TRT.L) by @mavix
Stock Price: 90 / Market Cap 14M
Revenue: 3M TTM; EBITDA: 496K TTM
Cash: 625K; Debt: 70K
Transense Technologies underwent a significant turnaround under the leadership of CEO Nigel Rogers, transitioning from unprofitability to profitability. The transformation came via the licensing of their iTrack System, a tire-pressure monitoring system for off-highway vehicles, to Bridgestone, yielding substantial royalties that are expected to grow. These royalties have been employed for share buybacks and investments in Transense's patented SAW (Surface Acoustic Wave) technology. The SAW technology, which holds promise across multiple sectors, has already secured partnerships with industry giants like GE, McLaren Applied, and Parker Hannifin. The potential of the SAW business is substantial, with real-world implementations in aerospace, motorsport, and beyond, offering significant growth prospects. The company's robust FY 23 financials and strong management confidence, evidenced by insider share purchases, further support the positive outlook. While the growth of the iTrack segment largely depends on Bridgestone, the upside potential from SAW technology implementations and other triggers makes Transense an intriguing investment prospect.
Disclaimer: All content in this newsletter is for discussion, education, entertainment, and illustrative purposes only and SHOULD NOT be construed as professional financial advice, solicitation, or recommendation to buy or sell any securities, notwithstanding anything stated on this newsletter and MicroCapClub.com. There are risks associated with investing in securities. Loss of principal is possible. Past performance is not a predictor of future investment performance. Ian Cassel and MicroCapClub.com are not responsible for investment actions taken by viewers. Should you need such advice, consult a licensed financial advisor, legal advisor, or tax advisor. You agree to verify all information yourself before investing. Any past performance discussed on MicroCapClub.com is no guarantee of future results. Investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. All views expressed are personal opinions as of the date of publication and are subject to change without the responsibility to update views. No guarantee is given regarding the accuracy of the information. FULL DISCLAIMER and TERMS OF USE
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