Immediately Actionable Idea #1: A Capital-Light Microcap Trading At A 50% Discount to Peers
An undiscovered Polish microcap with high growth, high ROIC, an impenetrable moat, and best of all, a low valuation.
In this newsletter, I intend to cover immediately actionable ideas as I find them. These ideas may include a special situation or simply a stock that is currently undiscovered and trading at a low valuation. The latter is the case now for Immediately Actionable Idea #1. These ideas and their performance will be tracked over time.
Conviction level: Medium
Risk level: Medium-High
Immediately Actionable Idea #1 has the following characteristics:
IAI #1 is a Polish microcap trading on the Warsaw exchange with a market cap under $100M USD.
The average trading volume is approximately $100k USD per day, making it suitable for only individual investors and small funds.
I have not seen this idea posted or discussed anywhere else in detail. There are only a handful of posts on X/Twitter ever covering the company, and I believe this write-up is the first ever English write-up on this company.
The company sells a product that cannot be directly disrupted or replicated due to the nature of the product having limited physical availability, granting this company a strong moat.
From 2021 to 2023, the company doubled revenue and tripled gross profit. Net profit increased 2.5-fold.
This company is capital light and has global industry-leading margins.
The company trades at under 7X 2024 EBITDA, under 10X 2024 EPS, and under 10X 2025 estimated EPS. Multiples that, given its quality and growth rates, I believe may ultimately prove far too low.
Peers trade at average multiples closer to 10X NTM EBITDA and 15 NTM P/E, putting this company at around a 50% discount to peer averages.
Given the company’s growth rates and low starting valuation, I believe there is little multiple compression risk, but moderate to high short-term earnings risk in the event of a recession.
This company has earned an ROC of 35% and an ROE of 42% over the LTM.
Let’s dive in!