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27.5¢ rxp services limited

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15,757 Posts.

11/10/16

10:57

Post #: 19766651
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Originally posted by mal85 ↑

If the business executes there should definitely be more to come.

If they hit their targets over the next 2 years (lower end is 10% revenue growth pa for 2 yrs) at the same margins, there should be a multiple expansion to at least 15-20, possible more. These give price targets starting from 1.40 to upwards of 3 if the upper end of guidance is met.

The upside is:
- higher end of revenue guidance
- improving margins with scale
- further acquisitions (there should be excess cash if the business executes)
- further multiple expansion (could eg be valued at 25x forward PE instead of 10x backward).

I bought on results as I felt that I had seen evidence of this execution after previous failures. At these prices there is extremely limited downside (current valuations essentially assume growth cannot be maintained).

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"25x fwd earnings' PE is waay too optimistic. RXP is a potential TO target as it ticks many boxes in an IT space that is undergoing rapid change and growth.... but 25x is not doable.

RXP Price at posting: 87.0¢ Sentiment: Hold Disclosure: Held
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