Hi there,
Mcloud has certainly taken a hit - it is down by 67% this year and is still stuck in a downwards trend. To be honest, the long and prolonged dip is tough to figure out. The company appears to be performing well with strong YOY growth. Through the first nine months of the year, revenue is up by 113% over the same period in 2019 and recurring revenue is up by 33% QoQ and 300% over Q3 of 2019. The pace of revenue growth did slow in Q3 (up only 3%), which may be a reason why the company hasn't been able to break out of its downtrend. The Pandemic and economic shutdowns has significantly impacted operations and slowed growth.
However, it does appear overdone. The company is seeing record inquiries for its AssetCare platform and last month, it also closed on the Kanepi Group acquisition. The company is now trading at only 1.33 times sales. Take into account the fact analysts are expecting the company to grow revenue by 115% next year to $74M and it is trading at below 1 times sales. Not only that, the company has a street target low of $4.00 per share - this implies more than 100% upside from today's price.
I haven't followed the company for any long period of time and we must always take analyst estimates with a certain degree of skepticism (especially as there are only 3 covering the company), but there appears to be a disconnect between valuation and fundamentals. Outside of lack of profitability which is normal for high-growth stocks, the other 'weak' point would be the fact it has a high debt load of $35M and a D/E of 667.13. That is quite high and may be what is holding the company back.
It is also worth noting that the company has "a combined sales pipeline and backlog of contracts greater than C$120 million" and believes it is poised for rapid growth in 2021. This fits with the narrative provided by analysts. Unfortunately, it is unclear what % of that backlog is actual contracts, and which are only potential contracts. This lack of clarity is a little frustrating - tried digging but can't quite make it out, nor can i get a sense of forward revenue run-rate outside of the analyst estimates.
The company seems to be trapped in a negative downtrend and bearish technicals. That being said, the company is firmly in oversold territory with a 14-day RSI of 22. This may very well mean the company is near the bottom and could be do for a short term bounce. Keep in mind however, that there may be something fundamental that I am missing here as it is selling off quite significantly. I'd approach with caution. As a small cap, it will be volatile and is not for the defensive investor.
Mat