CREX - Creative Realities: 3 Valuation Models Suggest Significant Undervaluation

2024-06-04 10:01:28 ET

Summary

• If CREX hits the lower end of its guidance, the company is significantly undervalued on a cash flow basis.
• If the company exceeds the lower end of its guidance, earnings will expand quickly, given impressive operating leverage.
• I could see the stock tripling once the free cash flow ramps up this year.

Thesis

Growing, profitable, inexpensive, and de-levering is a combination I love. Factor in cautious analysts, and you've won me over.

Creative Realities, Inc. ( CREX ) guided to grow 27-70% this year to reach revenues of $60-80m. This is a huge range, but I like uncertain situations, especially when analysts forecast a pessimistic scenario. CREX appears cheap, with an EV of $45m and an expected 2024 EBITDA between $7.2m (for $60m at 12% margin) and $12m (for $80m at 15% margin). Having restructured their debt to remove prepayment costs, they intend to use increased cash flows to pay down debt....

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