Shearwater Share Price (SWG)

Welcome the annual culling of revenues. Sheer slaughter as Stocko wittily jibed. There’s a thought, set a realistic target, and don’t waste time or money on anymore takeovers if you can’t make these ones pay their way. And don’t use ebitda every time to try and make it look less bad. Apart from that well done for ending up with a little cash ahead. How about a dividend? O I forgot it’s a growth company!

Incredible that revenues could be down on forecasts by such a huge amount. Cavendish were evidently totally blindsided by over-optimistic guidance from the company.

Cavendish, who now have a 78p target price, have reset forecasts for the coming year to £27.6m revenues, 2.4p EPS and a £6.8m closing cash pile at March '25 (against the current £10.35m m/cap).

The cash/asset backing to a supposedly profitable cyber-security business was the reason I invested here, so at least the downside remains well protected, but SWG have a lot of work to do to deliver potentially substantial upside from here.

I would rather Cavendish had underpromised further and forecast say £25m revenues, as overdelivering is always the way to go. Anyway, they conclude today:

"Valuation and conclusion: Shearwater Group is a company with a unique and differentiated set of capabilities in critical cyber security applications, and a global blue chip customer base. The company has a strong balance sheet and a track record of strong historic profitability and strong cashflow, together with a resumption of positive cash generation delivered during FY24. The current share price corresponds to an EV/Sales ratio of 0.2x. We are reducing our own target

EV/Sales to reflect the slower recovery trajectory, but we argue that a new target of 0.5x is justified based on the medium-term potential. This corresponds to a new price target of 78.0p."

Growth sector...Winning contracts...On a low PE....150p is my target...

Https://masterinvestor.co.uk/equities/alumasc-shearwater-and-more-all-on-the-move/

"Shearwater Group (LON:SWG) – Corporate Recovery Is Now Underway

It has not performed well subsequent to my previous COVID Profiles on this company, but I am now having another attempt at getting it right.

Capitalised at £12.1m, the cyber-security, advisory and managed security services group, which has recently secured an attractive three-year contract with a leading global bank for its services, is UK-based but operates on a global scale.

The company is expected to see its sales for the year, to the end of March 2024, rise from £26.7m to around £32.5m, spinning it around from its previous pre-tax loss of £1.3m to a profit of some £1.0m, worth 4.2p in earnings against a 0.4p loss per share.

Estimates are already out there for the coming year to lift revenues to £37.0m, hoisting profits to £1.7m, worth just over 7p per share in earnings.

It is the anticipation of this recovery, as well as its potential over the next 15 months, that makes the group’s shares at just 50.50p look an attractive counter in 2024.

Analyst Price Objectives are just above the 100p mark."

Excellent news - great to see the second UK Government department contract win as these tend to follow on from each other once you're "in".

And the big 3 year $3.15m cyber services win with the global bank is also expected to contribute to this current financial year to March '24, so this year's forecasts are looking well supported.