It’s fascinating to me to explore public markets in a post-covid, post-stimulus, post-SaaS mania sense. There are countless charts showing massive rises or IPOs, and then subsequent falls in a matter of years. This is becoming increasingly fascinating to me and here’s why:
At what point is the selling, the fear, the pace of markets, gone too far? I firmly do not believe markets are efficient, because after all, they are operated by people like you and I, and we are not efficient. We make mistakes all the time. So, is it possible that companies like Expensify (other tech companies like it) have been sold too far into the pit of fear after the post-covid stimulus and boom? Yes, I think it’s possible.
Reversion to the mean or value investing – it’s a bit o both.
I plan on writing far more often in 2024, and today I want to get right to one example that comes to mind: Expensify (ticker: EXFY). Just a few years ago, they had a Super Bowl commercial and music video made and were the hottest IPO in town.
Today, all that hype looks like this:
Here’s why Expensify caught my attention: The company has cleared its debt, a significant move that shifts its financial landscape from leveraged to liquidity-rich. With its balance sheet now boasting only cash, earning steady interest from 5% treasuries and CDs, Expensify presents a financially sound profile. Furthermore, the company has an active $41 million stock buyback program, signaling confidence in its own undervalued stock and a shareholder-friendly capital allocation policy.
Financially, Expensify projects a free cash flow (FCF) of $10-12 million this year. When you consider the current market price, the stock is trading at roughly 10 times its FCF, significantly lower than the industry standard for tech companies, which often hovers around 30 times FCF. This discrepancy suggests that Expensify’s stock has substantial room for appreciation to align with sector averages.
On the operational front, Expensify has a robust customer base of 45,000 businesses and over 10 million users. The recent introduction of a new credit card program and a Venmo-like feature for splitting bills and sharing money underscores its commitment to innovation and market expansion. Yet, despite these strengths, the stock has been battered down for multiple years now. The chart above says it all.
While I share this analysis to outline my rationale, it’s not investment advice. I encourage everyone to conduct their own research and consider the unique opportunity that Expensify presents in the current market context, especially for those interested in blending value investing principles with tech sector exposure.
Nevertheless, I plan on writing more blog posts like this in 2024, being transparent with my analysis, and writing more & more about markets, life, and current events that matter.
I am just an average dude, managing his own account…
Investing Insights 