Jason Del Vicario Docebo DCBO-T DON'T BUY Feb 08, 2023

Is well off its pandemic highs. The valuation remains high, but are growing fast. Investors like their high gross margins, but that hasn't trickled into profits. But they are investing in their business. Not a bad name, but is still richly valued. 

It is a Canadian company that does online training with add-on new clients. There is a breakout to the upside on volume. This is after basing most of the year after declining from around $92 to $23.        Buy 10  Hold 1  Sell 0

He doesn't own any of his top picks but is planning to buy 2 or 3, probably 3 within the next couple of weeks.

Its recent earnings beat estimates, but revenue guidance of 17% to 18.5% was slightly below consensus estimates. Management noted weakness in its small and medium-sized business customers, but strength in its government and enterprise customers. One of the main remarks from its press release that concerned investors was an expectation for continued macro-economic headwinds to affect its SMB and lower mid-market customers, as well as a seven-figure negative impact on its ARR base resulting from a large enterprise customer terminating its agreement. In the earnings call, management reaffirmed that it is seeing pressure in its SMB segment over the past few months, but management expects it to diffuse over time. 

The flip side to this issue is that management is seeing strong growth in its enterprise and government segment. It is still waiting on its FedRAMP certification, but it is expected to boost the company's government segment in 2025, and potentially somewhat this year. 

It is not that cheap at 32X forward earnings, but certainly cheaper than previously. It continues to generate free cash flow, buy back shares, and improve its margins. Fundamentally, its metrics look good, but the churn in SMB customers is concerning investors, but we feel its foray into the enterprise and government sectors can help lift its guidance over the long-term. 
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Good and innovative. They offer learning software that companies use to train employees and clients. His concern is that the founder and senior leadership have sold a lot of shares--a big red flag. Also, there's a lot of competition.

EPS of $0.365 beat estimates of $0.311 and revenues of $75.0M beat estimates of $73.218M. Sales grew 19% driven by higher subscription revenue and customer retention. Adjusted EBITDA margins expanded from 9.7% for the same period in the prior year to 15.7%. Management noted advancements in its platform and scaling of its international operations as key drivers for sustainable growth. Its valuation is not cheap, trading at 39X forward earnings, but growth rates are good, and it is expecting to continue expanding its margins. We feel these were good results.
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EPS of 28c beat estimates of 24c; revenue of $57M beat estimates of $56.1M. EBITDA of $9.5M beat estimates by 3%. But guidance came in light at $57M, vs estimates of $58.7M. Expected F/x headwinds really hurt guidance. Sales rose 16%. EPS more than tripled year over year. Cash is $82M. At the guidance level, growth is expected at 11%. The stock's reaction is very harsh, and probably more than overdone, but it is that type of market these days. Investors are worried about a lot of things, and a miss is extrapolated to mean that everything is turning. This is not likely the case here, BUT....The stock is at 26X earnings and with its new expected growth rate is could be viewed on the expensive side. We think a buy opportunity is going to set up here, but we would view it more as a HOLD until the current market angst settles down a bit.
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