I can foresee two extreme-case scenarios for this company:
- LeadDesk operates in a fundamentally terrible market or its business model is flawed. The company tries to mask this by continuously making acquisitions to patch up a plunging revenue and to justify weak cash flow. All operational cash flow goes into patching up legacy software. The business has no terminal value due to AI risk or the structural unprofitability of the industry. LeadDesk is burdened with debt and will soon have to patch this up with unfavorable financing solutions.
- LeadDesk executes a successful M&A strategy in its own niche market, through which it has internationalized brilliantly and more than quadrupled its revenue from 2019 to 2026. The acquisitions essentially acquire a customer base that is integrated into the company’s own platform, resulting in a certain amount of the acquired revenue always dropping off. This looks bad in the growth figures, but it is part of the nature of the operations and is also reflected in the pricing of the acquisition targets. The company’s true profitability is constantly obscured by the costs of ongoing integrations. At some point, the extra costs will be trimmed, and profitability will reveal itself to be what a scaled SaaS software company is supposed to be.
Even when trying to think about these rationally, the price reaction always clouds one’s own thinking as well, which is why the possibility of a financial crisis or another bomb revealed in the next interim report is foremost in mind. However, if this is not the case, it looks insanely cheap and the value should be a multiple of the current one. I cannot assess the AI risk as I am not more closely familiar with the industry.