[ $SSTI ] ShotSpotter Stock Analysis & Insights
Why I like the Company ShotSpotter and my updated brief insight on the company
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Welcome to Momentous Insights where we
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Insight the Future | Speak the Truth | Change with Facts
To get outsized returns in the irrational stock market it all balls down to two of my favorite quotes by Thomas Phelps & Benjamin Graham which is 👇🏾👇🏾👇🏾
To make money in stocks you must have the vision to see them, the courage to buy them and the patience to hold them. Patience is the rarest of the three. - Thomas Phelps
The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists. - Ben Graham
You will see those quotes very often in my insightful docs because it's so true. Ok now on to the doc.. My goal is to find unjustified pessimism which leads to value and have the patience to hold that value unless the facts change. So that is what I'll focus on. Today I will try to explain the value i found in roughly 14 min. My name is Mya Parker and I’m a 14 year old investor, financial youtuber, enthusiastic gardener, and Christian, amongst other things but not a financial advisor.
Although really when it comes to investing, “I’m just a studier of history and a speculator of the future based on history.” - Mya Parker.
This is momentous insights and today I will give you my insight on the company ShotSpotter $SSTI.
Insightful Diligence
Problems
Criminals are evolving so we have to evolve too if we want to maintain safety, law, and protect the people in this world. Police said in an article on fox5atlanta.com that “...only about 20 percent of all shootings are reported.” That means that greater than 80% of gunfire incidents are never reported. Also gut-based patrolling leads to missed opportunities. This shows multiple problems that all start with detection. So obviously one problem is detection, the second is protection and the third is connection.
Solutions
ShotSpotter has one of the best if not the best solutions for this and they try to provide as much value as possible yet diminish as many challenges as possible by providing trials of their products, continuously improving their products through Artificial Intelligence, Deep Learning, Machine Learning, & many other things. ShotSpotter has one of the best and most innovative solutions that keeps improving out there for staying ahead of criminals and reacting as efficiently and effectively as possible when patrolling and policing which have been seen in multiple news articles and like many other companies data is their oil. In their latest 10K it states “In 2020, we were mentioned in over 12,000 articles, broadcast TV and radio segments - the majority of which were organically generated.” This exposure creates awareness for their solutions and lends credibility to their market leadership position. This company is recognized so much for how the innovative technology helped different police officers, rangers, etc. They solve all the 3 problems by the ways listed below.
Detection - Verified gunfire alerts in <60 seconds - enable rapid, precise responses.
Protection - Consistent detection and response - lead to lower gun violence.
Connection - Improve evidence collection - to solve more cases.
Here is a link to the video to see how their gunshot detection solution works
But lets make it clear ShotSpotter sells outcomes not technology so see the Proof of Concept in the following pictures below.
After seeing this i bet you can understand why in 2020 they had an high Net Promoter Score (NPS) of 70.
Competitors
Since ShotSpotter Respond accounts for 90%+ of ShotSpotters revenues (The company we are talking about today) we will speak mostly on this solution in this doc. ShotSpotter Respond is unique because it provides scalable wide area gunshot detection over large and geographically diverse areas, provides immediate and precise data on gunfire, helps communities define the scope of illegal gunfire, and provides cities with detailed forensic data for investigation, prosecution and analysis. While they seem to have no direct competitors offering wide-area solutions comparable to ShotSpotter Respond, the management believes the primary competitors in the broader gunfire detection space are V5 Systems, Safety Dynamics, Inc., Wi-Fiber, Inc., Databouy, EAGL Technology and Alarm.com. Most of other outdoor solutions that compete with ShotSpotter Respond on the market offer limited scope point protection, proximity sensors, or “counter-sniper systems.” These systems are designed primarily for covering small areas, or for defined military or SWAT team applications, where the target is known in advance and it is possible to put a sensor directionally toward the target. However, urban areas and critical infrastructure require a wider system of protection that can cover a large area. I’d say they have lots of competitors not even mentioning the fact they are competing for the funds allocated to them out of their tight customer’s budgets since they are cities and stuff.
Management
“I prefer to sail in a bad ship with a good captain rather than sail in a good ship with a bad captain.” - Mehmet Murat ildan
So obviously a ship is of no use without a good captain and at the end of the day the team you build is the company you build. So analyzing management is important and one of the determining factors if I buy a company or not so we will deter from the previous a little bit to stop and analyze management. The rare african american CEO Ralph A Clark is amazing, communicates in easy to understand terms showing his competence and intelligence. Definitely seems to have a passion for what he does which I came to a conclusion to after watching multiple interviews. He also literally stated in a podcast he did on AEI Podcast Channel on YouTube that he hates talking about himself symbolizing humility and his hard work symbolizes extreme will; these two paradoxical mix of things together symbolize a Level 5 Leader. Examples of Level 5 Leaders include Bill Gates, Elon Musk, Mark Frohnmayer, Galileo Russell, Zachary Cox etc. Here's something also to note about him, he owns about 4.02% of ShotSpotter and insiders all together own about 18.32% of ShotSpotter according to simply wall st. Also for more information on the amazing leadership at the company just research it yourself using various reputable sources such as linkedin and the investor relations page etc. . Though one more key person I'd like to address is Dr. Bob Showen, their true inspiration comes from their principal founder, Dr. Bob Showen, who believes that the highest and best use of technology is to promote social good. He’s primarily known for using technology for good but also finding the epicenter things (math lover & humanity lover)
Objections
Pitti the Pessimist: Not every great company is a great investment?
Mya the Optimist: I agree but i also believe everything has a value at a certain price and this is no different.
This company is growing both top line and bottom line at double digits and is profitable with 58% gross margins which management expects to continue to increase during 2021. Net Operating Cash Flow of 3.99M. Fwd PE of 62.11. With EBITDA of 8.41M which shows their earnings power in the upcoming years.
This company also recently raised guidance to 60M-61M in revenue for full year 2021, a FWD EV/S of roughly 7.5 using 60.5M for sales and the current EV of 454.9M, and have historically grown revenues at a 30% CAGR. This company also has a very low attrition rate which they believe will be far below 3-4% and their revenues are primarily subscription based with agreements with their customers being 1-5 years, though for most agreements its 1 year. Their revenue retention rate in the past has been above 100%.
This company has almost 11M in cash and practically no Debt.
This company itself purchased 56,000 of its shares in Q1 2021 alone at an average price of $39.02 or $2.2 million. The current share price of a stock in this company is $39.84. Who understands the company the best? The insiders do not me nor you. This shows you conviction. I mean you sell stock in a company for many reasons but only buy for one, you think the suckers going up. Personally i wouldn’t be buying at $40 as i believe it’s only fairly valued then or anywhere near there as id prefer to start a position around the $20-$30 range. Although i may be wrong as the management is buying and its far more important to get the next MultiBagger in your basket of stocks your invested into rather than worrying about 20%-30% decreases in prices before you or I buy.
The insider ownership is above 18% and the ceo himself owns about 4% according to simply wall st and seeking alpha. This is important because it incentivizes long term thinking which incentivizes better short term decisions because you are acting based on the long term.
Pitti the Pessimist: What about dependency of revenues from one person after all it subscription based means nothing as far as security goes if its too concentrated and dependent on one customer alone?
Mya the Optimist: I agree but if you actually read the 10K you’d know that the risks of that have been diminishing and isn’t very prevalent compared to a company such as UpStart $UPST. Also here is what they stated in the latest 10K on that, “For the year ended December 31, 2020, our two largest customers, City of Chicago and City of New York accounted for 18% and 15% of our revenues, respectively. For the year ended December 31, 2019, our two largest customers, City of Chicago and City of New York accounted for 20% and 14% of our revenues, respectively. For the year ended December 31, 2018, our two largest customers, City of Chicago and City of New York accounted for 22% and 15% of our revenues, respectively.”
Pitti the Pessimist: What does it look like to get a customer on and why can’t they get more customers on even faster?
Mya the Optimist: They state in the 10K “We recognize subscription revenues over the term of a subscription agreement. Once we enter into a contract with a customer, there is a delay until we begin recognizing revenues while we survey the coverage areas, obtain any required consents for installation, and install our sensors, which together can take up to several months or more. We begin recognizing revenues from a sale only when all of these steps are complete and the solution is live.”
Pitti the Pessimist: Ok if the company is so sound then why is no one buying the fairly valued company?
Mya the Optimist: I think their true major risk that should not be overlooked is the fact they depend so much on budgets of police etc. And movements which we all know can be powerful and are getting more and more powerful as social media rises such as the “Defund the Police” movement could determine the future of the company which is outside of the management hands. Secondly they could have serious allegations thrown to them true or false that could ruin their brand and goodwill similar to how Short Sellers who think short term due to good companies such as Arcimoto $FUV. Also another risk that is why people may not invest in this company is the fact that they are very small and have more than 10% short interest (although that isn’t a concern to me) Lastly these reasons people aren’t investing seem not to be very evident but id have to dig deeper as you can never be finished researching although i do believe so far those are the major reasons people aren’t investing.
Pitti the Pessimist: Are you even invested in this company or are you all talk and no action?
Mya the Optimist: You should take everything said in this article with a grain of salt as im not invested in $SSTI ShotSpotter and im not a financial advisor.
Perfection is just a direction - Elayne Quirin
Do remember perfection is just a direction and i don't buy or sell stocks bc of relative or absolute valuations.. I use this as guidance nothing more nothing less.
What i Believe & What I’m Doing
Personally I think ShotSpotter is only an intriguing investment anywhere below $30-$20 if you want close to no doubt at beating the market significantly though I wouldn’t be a buyer at $40 at all even though it's fairly priced at $40. Although I may be wrong as management was buying around these prices and they know the company far better than me.
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