RCMT - RCM Technologies: Strong Q4 FY23 Results But FY24 Could Be Challenging

2024-03-19 21:59:35 ET

Summary

• The company booked EBITDA of $8.1 million for Q4 FY23 thanks to strong revenue growth at higher margin life sciences and information technology segment.
• However, I’m concerned that FCF and share buybacks were limited by growing accounts receivable and net debt.
• While the company doesn’t look expensive at 8.7X EV/EBITDA, FY24 could be softer than FY23 due to the rising US unemployment rate.
• In my view, this is a good time for investors to trim or close their long positions.

Investment thesis

I've been following RCM Technologies ( RCMT ) closely and I've written three articles about the company on SA. The latest of them was in November 2023 and back then I said that the valuation was starting to look stretched despite my expectations that EBITDA for the FY23 would surpass $20 million....

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