I wanted to share this idea below as the stock is starting to wake up as we move towards JP Morgan.
SMLR is my top idea for 2020 and my largest holding. A very good writeup from shareholder NYC hedge-fund GCI Partners is attached here and I have permission to forward it.
I think SMLR shares offer a unique opportunity for two reasons:
1) SMLR has an incredible business model (98% recurring revs, 90% GM, very low penetration rates, no capex needs, huge incremental margins, big FCF). The company is firing on all cylinders right now (recent 3Q results saw accelerating growth of +60% yoy and profits up +110%) and there is ample evidence from leading indicators that indicated business trends should remain outstanding
2) Despite SMLR printing consistently strong results, the shares didn’t move much in 2019 and have been more or less rangebound, despite the market for fast growth healthcare names and high quality business models having been exceptionally strong. I believe this is mainly due to the fact the CEO had a stroke in June, and the resulting fear and lack of communication scared away some shareholders and kept potential new ones away. I believe this dynamic is set to reverse and that in 2020 the shares can benefit from simple catch-up off 2019 results and continued strength in 2020 #s. There was no cc for 2Q (results were notable), but there was a cc for 3Q in Nov and next wk the CEO will actually attend the big JP Morgan Healthcare conference (w packed 3-day meeting schedule), so there is a major inflection in communications in place right now- which while I don’t usually care so much about, I think makes a big difference in this case given the circumstances.
After a period of consolidation, I feel like the shares are ready to break-out and then through 2020 make consistently new highs if SMLR contuse to execute and beat the estimates as they have been.
The GCI Partners writeup is attached, and fleshes out a lot of the themes I have discussed above while also giving good color on different strains of independent research and leading indicators at the customer level, the hiring level and in the cash flow statement along with some impressive valuation analysis. It’s definitely a worthwhile read. Let me know if you would like an introduction to the company- I am not the IR rep, but I have a solid relationship w the CEO.