Originally Posted by
wagwan
Plexture chair Phil Norman has been quoted in the media saying:
Since joining Plexture in 2017, Mr Herbitson has lead the business through a significant transition from a loss making entity to becoming cashflow positive and profitable in 2018 and 2019"
Does this reflect a fundamental misunderstanding of where Plexture's true value lies? Or, if that isn't the case, speak to a Plexture's strategy being off the mark?
Those who understand investing in the tech sector would know that tech companies such as Plexture are valued based - at a high level - on a multiple of their revenue, with revenue growth being a key determinate of what that multiple might be.
The basic model for delivering value to shareholders is one of acquisition. With the above valuation context in mind, the strategy of such tech companies is to grow revenue as quickly as possible, so that a) the revenue base to be multiplied is as large as possible, and b) quicker growth = larger multiple.
Growing as fast as possible means investing heavily in all areas of the business - the result of which is, in most cases, a cash deficit and/or trading loss. As opposed to traditional models of value whereby a business is valued based on a measure of it's underlying profitability (eg: a EBITDA multiple), in the case of tech it is more often than not a good thing if the business has a cash deficit
To that end, Norman's words above do seem to be a cause for concern - is there anything that relates to Plexture in particular that people know of, which would mitigate or explain this?