Company: Gomero Group
Ticker: GOMERO
List: Spotlight Stock Market
Market cap: 60 million SEK / 5,8 million USD
Share price: 15 SEK at time of publication
ESGFIRE average price: 15 SEK
Market Size: $24,5 billion by 2023
Industry: Electric grid infrastructure protection & Surveillance
Website: https://www.gomero.com/
ESGFIRE comment:
We are introducing a new ESGFIRE portfolio company in Gomero . We expect by our estimastes that the company to grow by between 20 to 40 % annually over the next 3-5 years due to increased demand for their products and services. By our estimates the company is currently valued at between 8-10 X EBIT for 2023.
Gomero provides predictive maintenance for energy distribution thereby preventing down time in key infrastructures. The smart and connected products from Gomero prevent the release of oil and harmful environmentally dangerous gases such as SF6 gas. With Gomero products power operators can free time and resources for their technical engineers so that they can focus on expanding rather than surveying the electrical grid. Gomero has more than 100 customers in nine countries and offers a secure and established IoT-solutions for a globally growing market.
The company is facing an excellent growth trajectory thanks to their new products and expansion into new markets. At the same time the annual market for Investments in distribution network within EU+UK is expected to grow between 50-70 % from 26 billion EUR to 34-39 billion EUR. The increased budget has to do with ability to meet demand, integration of renewable resources, increased flexibility/ quality and digitalization.
Valuation Scenario:
The financial goals of the company is to grow annually by 15 % organic and with an EBITDA margin of 15 % . Considering that the company on a rolling 4 quarter overview has grown on average by 37 % and with an EBITDA margin of 19 % ESGFIRE thinks a growth rate of between 20-40 % definately is to be expected in the next 3-4 years. It is also worth noting that the company is debt free and had a cash position of 9,939 million SEK by the end of Q3 2022.
Assuming a growth of 30 % in 2023, and assuming a base revenue of 38 million SEK for the full year of 2022, this would equal revenues of 49,4 million SEK for 2023 with a potential 7,41 million SEK EBITDA. This assumption is conservatively assuming a 15 % EBITDA margin and not 19 % which the company has had in the last 4 rolling quarters. The company should , by our initial analysis, not be facing any large depreciation or amortization (partly the company is debt free and has 0 goodwill in its balance sheet) which is why we in this case dare to assume that the EBITDA would almost equal the EBIT result . In this assumption the current valuation on 15 SEK would therefore indicate a 8 X EBIT multiple for 2023.
A company growing by 20-30 % per year should according to ESGFIRE be able to trade between 20-30 X EBIT which would indicate a fair value share price between 37,5 SEK to 56 SEK as opposed to the current share price of 15 SEK for 2023 alone. As always all stocks are associated with risks however since Gomero is debt free, has a cash position of close to 10 million SEK and is in a growing industry we see little downside today unless there is a large market wide sell off.
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We personally own stock of the company mentioned above.
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