BVS AU - your "recurring revenue" isn't that recurring when "attached recurring revenue" can fall 25% YoY, is it? (even with a $c1.6m contribution from acquisitions across all RR lines).
Is cyclical usage/demand dependent revenue really "recurring"?
Granted - it's much more recurring than project work and cyclicality doesn't mean its not recurring in a sense. But most software investors tend to view recurring revenue as synonymous with locked in/annuity revenue, and it sometimes ain't.
It also amuses me how often highly-rated (esp small cap) companies that are widely seen as having the most dependable earnings turn around and print a 50% decline in earnings. Often people mistake a supportive cyclical industry backdrop over past 5yrs for low earnings risk.
Also, interestingly, this is how the chart looked when they last reported their results. Notice anything different?
No mention of "attached" recurring revenue.
One wonders if we will see yet another subdivision of "recurring revenue, contracted" in the future, were the aggregate to ever decline. No doubt it will demonstrate continuing growth in the "actually recurring" part, and declines in the "kinda recurring but isn't really" part.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
Here is a a look at the NASDAQ's earnings trend. Interestingly, earnings have been falling since 2018 and are actually (1) down about 25% from their 2018 peak; and (2) currently slightly below 2016 levels.
This is actually not atypical late in a boom/bubble. The flood of capital into an industry usually drives down returns. Often that's ignored because people are focusing on the growth narrative/top line instead of earnings & returns on capital. Eventually earnings matter though.
It goes without saying that the consensus earnings estimates shown in light shade are likely to prove fairly delusional. I think we are most likely to see a continuing downward trend in earnings from here until we have a 2000-style bust & resultant industry capital rationing.
Near the top (in time, not necessarily price), you'll often see very violent swings, as investors try to determine if it really is game over. Retracements are brutal & fast, but if a bubble survives such a pullback/market test, it will often quickly catapult back to new highs.
In speculative markets the price action is path dependent. People sell because the market is going down & fear more, and buy because it's going up & worry they'll miss a run up. Demand and supply becomes primarily a function of the price action itself.
George Soros talked a lot about this. Bubbles face "tests". If they survive the test, they catapult to new highs. Usually they survive multiple tests on the way up. But at some stage the tests fail and the markets breaks catastrophically down and doesn't come back.
It is concerning, but highly predictable, that "fact checkers" would not recognize the difference between reasonable differences in opinion/interpretation on complex issues, and demonstrably false facts. Everyone thinks their own opinion is right, or they wouldn't hold it.
Human judgment is fallible and is subject to a serious risk of confirmation bias. "Fact checkers" that see articles that make arguments they instinctively/ideologically disagree with are very quick to use that confirmation bias to find evidence that supports their view.
A lot of people are arguing the sell-off in tech/high flying growth names is due to the longer duration of their cash flows, & hence greater sensitivity to higher discount rates. That's not the real reason. It is instead due to their sensitivity to liquidity conditions (thread).
A huge amount of money creation has occurred of late via central bank printing, and it's flooded into certain sectors of financial markets. Desperation for any sort of return in a zero rate environment has also pushed risk averse capital into riskier assets - alts & stocks.
Wary of the impact of covid on the economy, that money has flooded into perceived lower risk stock exposure - "covid winners"/secular growth stories perceived to be immune. Performance chasing, and the high weighting of frothy growth stocks in ETFs has also contributed.
Excerpt from Bloomberg article on recent exponential runup (to >70x earnings) recent 20% pull back in Moutai.
When will investors learn that there is zero skill involved in jumping onto a momentum bandwagon. Being up 100% last year is a sign of ineptitude, not skill.
Same with Cathy Wood, who will suffer a dramatic reversal of fortunes sooner or later, w fawning admiration replaces with scorn. Many people are impressed by her triple digit returns. I'm appalled and think they are a sign of recklessness, inexperience & lack of risk awareness.
It's actually worse than that though because investors like Cathey Wood actually play a large role in creating the bubble in the first place. They use captivating narratives to attract unsophisticated investors en mass & plow that cash into bubble stocks driving them sky high.
Litigation funder OBL AU suffered adverse rulings on a few cases. They highlight the impairments they needed to take in period are "non cash". But the capitalized intangible balances being impaired reflect past lawyers salaries that were paid in cash but capitalized.
Companies do this all the time. They incur real cash expenses in one period, and then take "non cash" impairments in future periods, and point you to "adjusted earnings". If you don't watch out for this, you will be seriously mislead about how profitable these coys really are.
Granted, impairments can be lumpy. But if they are going to "adjust" earnings this period, they should also go back and adjust their "adjusted earnings" from past periods as well to reflect the prior overcapitalization of expenses that occurred, & hence over-reporting of earnings