Plurilock’s Value Divergence: AI Cybersecurity Company Trades at Less Than 10% of Revenue
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TDR Three Takeaway:
Discrepancy in Growth Metrics: Plurilock has a modest 3% year-over-year revenue growth, contrasting with a 300% three-year Revenue CAGR, indicating significant long-term growth potential.
Low Market Capitalization: The company’s market cap is less than 10% of its projected annual revenue, hinting at potential undervaluation.
Financial Outlook Review Needed: Given its current liquidity and growth prospects, a closer financial review is essential to assess if Plurilock will require more capital for future sales and profit margin improvements.
Plurilock Security Inc. (TSXV: PLUR) (OTCQB: PLCKF), based in Vancouver, Canada, is engaged in providing AI-driven cybersecurity solutions. The company’s recent achievement includes securing a US$4.7 million sale order from a U.S. public library, which aligns with its strategy to increase revenue and focus on high-margin offerings.
Plurilock’s financial performance is quite perplexing. On one hand, its year-over-year revenue growth is a mere 3%, totaling $48.0 million for the nine months ending September 30, 2023. On the other, the company boasts a remarkable three-year Revenue Compound Annual Growth Rate (CAGR) of 300%. Here’s where it gets even more baffling: the company’s market capitalization is astonishingly less than 10% of its anticipated 12-month revenue at the close of the 2023 and 2024 fiscal years – closer to 7%, to be precise, though I’m erring on the side of caution with these numbers. This leads us to the next logical step: evaluating the health of the balance sheet to see if it can sustain the company while it works on enhancing profit margins.
A preliminary review of Plurilock’s balance sheet, particularly focusing on the earnings reported as of September 30th, indicates that the company currently possesses sufficient liquidity for its short-term needs. Yet, considering the modest revenue increase in the past year coupled with the immense growth potential suggested by the three-year Revenue CAGR, a more thorough analysis of Plurilock’s financial projections for the upcoming one to two years is essential. This deeper dive is key to assessing the likelihood of the company needing to secure additional funding as it endeavours to boost sales and augment profit margins.
Strategically, Plurilock’s growth has been influenced by key acquisitions, such as Integra and Atrion in 2022, which have been pivotal in enhancing software and professional services sales. The company’s gross margins have improved to 10.3% for the nine months ending September 30, 2023, driven by these acquisitions and a targeted pricing strategy.
Operationally, the establishment of an Information Security Advisory Council and the successful contract transfer with the State of South Carolina demonstrate Plurilock’s commitment to operational efficiency and business synergy. These measures have already led to cost savings of $133,000 in the nine-month period ending September 30, 2023.
Plurilock Security Inc. demonstrates growth potential and strategic positioning in the cybersecurity market. However, a detailed analysis of its financial performance in the upcoming years is critical. This examination will aid in determining if additional capital is necessary, considering its present liquidity and expected growth in sales and profit margins. We intend to closely monitor Plurilock and are considering the initiation of formal research coverage on the company.
Bill (William McNarland, CFA) has over 25 years of experience in complementary areas of the capital markets, encompassing private equity and credit due diligence, economic and stock research and corporate finance. He has served on the boards of six different companies and has fulfilled roles as a Trustee and member of the Investment Review Committee for regulated investment funds. Having completed nine degrees and designations, with a notable distinction as a Chartered Financial Analyst, Bill is currently advancing his academic pursuits with a Master's in Psychology. Furthermore, he is a published author of seven books, all of which are available on Amazon.