Top stock ideas (Wed, Mar 6)

Research Solutions, Inc. (RSSS), holding a 24.0% portfolio stake at a $1.80 cost basis (up from sub $1.00 in 2017), saw its stock down 22.0% in 2022 but rebounded with gains of 41.0% in 2023 and over 25.0% in the current year. This scientific information services provider—akin to Bloomberg in finance or Lexus Nexus in law—reported 15.0% revenue growth for 2023 and a 21.0% gross profit increase. The Transactions business, which sells scientific articles and counts 70.0% of the top 25 pharma companies among its 1,360 customers, saw a revenue jump to over $30mm and a corresponding gross profit of $7.7mm, attributed partly to a European customer list acquisition, expecting revenue growth to normalize to low digits with gross profit staying over $8mm. The segment is pegged at an approximated value of $1.00 per share. The SaaS Platforms segment, catering to the scientific research community, boasts an impressive 32.0% revenue growth to $10.3mm, ARR hitting $15.7mm (77.0% growth), and 86.0% gross margins due to 19% subscription growth and a 13% increase in average sales price. Two significant AI company acquisitions, scite and Resolute, enhance the flagship Article Galaxy product, creating a robust suite with a substantial market expansion. RSSS witnessed a leadership shift with CEO Roy Oliver targeting $20mm ARR for Platforms by late 2024 and projected a $30mm ARR by late 2026, coming off a tumultuous period marked by a dispute which resulted in board changes. With a $20mm ARR target 'in sight,' the company may initiate a sales process in the second half of 2024, eyeing acquisition values comparable to other information service providers with imminent potential acquisition prices anticipated in the range of $7.00 to $10.00 in 12-18 months, which could represent over a 200.0% increase from the current stock price.

Read the full article here. Read time: 4 min

Austin Gold Corp., a junior mining company, presents a unique investment opportunity with its focus on gold exploration in Nevada and Oregon. The company's key projects include Kelly Creek in Humboldt County, NV, Lone Mountain in Elko County, NV, and Stockade Mountain in Malheur County, OR. These sites were selected for their significant geological potential and previous exploration data compilations. Austin Gold Corp.'s approach is underpinned by experienced leadership and alignment with the Lassonde Curve, a foundational model in junior mining, predicting value growth through company life stages. Their exploration strategy, grounded in technical expertise, positions Austin Gold for potential discoveries and advancements in the gold mining industry, making it an attractive option for investors looking at junior mining companies.

Read the full article here. Read time: 4 min

Turtle Beach Corporation ($HEAR), a leading console gaming headset manufacturer, is a buy following activist engagement from multiple parties, including The Donerail Group, now holding a majority on the board after repeated acquisition offers and a proxy battle. With an 80% revenue share from console gaming headsets and a strong market presence, illustrated by its 37% market share and positive reviews, Turtle Beach is positioned for a sell at a premium. Revenue growth was 92.7% in 2018 and 53.5% in 2020, due to the Fortnite craze and the pandemic's gaming boom, respectively, but saw a decline in 2021/2022 due to chip shortages affecting console availability, leading to inventory buildups. The strategic positioning with reduced costs and improved margins, alongside significant brand value and cash flow generation, underpins the investment thesis. The company boasts a clear majority of North American sales (73% YTD in 2023), with expanding EMEA and APAC markets. The operational improvements, including margin expansions and anticipated sale, could realize value, with prospective buyers likely among well-capitalized competitors such as Corsair Gaming, Microsoft, Logitech, and HP. The potential sale would follow transactions in the sector at multiples far exceeding Turtle Beach's current trading multiple, while the threat of increased freight costs due to tensions in the Red Sea presents a risk of margin compression.

Read the full article here. Read time: 11 min

Betacom S.A. (BCM.WA), listed on the Warsaw Stock Exchange at 5,25 PLN per share with a market cap of 21.210.000 PLN, has demonstrated robust growth with three consecutive profitable quarters and offers a compelling valuation with potential for decent dividends. The IT services company specializes in Hybrid IT, Logistics, Education, and Smart Workplace solutions, focusing mainly on the Polish market but aiming to increase international revenues to over 15% within three years, particularly targeting the DACH region, the Nordics, and Benelux. Betacom's client base spans several sectors, including finance, retail, manufacturing, transportation, education, and government, and the company consistently invests in expanding its offerings, notably with a recent 51% acquisition of Control System Software and receiving 15 million PLN in R&D grants. Its growth catalysts are rooted in burgeoning demand for Robotic Process Automation (RPA), Transport Management Systems (TMS), data security, and electronic document management, buoyed by new EU regulations in transportation and fisheries control. Financially, Betacom showed a 23.7% year-over-year revenue growth to 146.1 million PLN and swung from a loss to a net profit of 1.9 million PLN, trading with low valuation multiples (PE of 11.17x, PS of 0.12x) with cash representing nearly 60% of its market cap. Its capital structure shows high insider ownership over 60%, and recent management shifts indicate a focus on increasing shareholder value. With no analytical coverage or buzz on Twitter, Betacom presents as an under-the-radar company with a strong setup for investment consideration.

Read the full article here. Read time: 7 min

R1 RCM Inc. (ticker: RCM), a leading provider in the underpenetrated outsourced Revenue Cycle Management (RCM) sector for hospitals and physician groups, is poised to dominate the industry with its comprehensive and scalable solutions. With only 30% market penetration, there is significant growth potential, especially as R1's recent acquisition of Cloudmed—a company with a strong EBITDA margin of over 40% and 117% net revenue retention—positions it for a mid-teens revenue CAGR over the next few years. R1's integration of Cloudmed’s technology and its collaboration with Microsoft for billing productivity will likely drive a network effect and improved margins through AI and Machine Learning advancements. Despite current challenges including negative sentiment, high short interest, and accounting concerns, we maintain that R1's underlying value is misunderstood. With a focus on the long-term potential, we see minimal downside risk as latent profitability is expected to emerge from maturing clients and Cloudmed's growth. We forecast a revaluation of RCM closer to its fair value at 15x its 2026 Free Cash Flow, offering a potential doubling in stock price over the next two years. This outlook relies not on new business-wins, but the natural growth from existing clients and technological efficiencies. Emphasizing the importance of seeing beyond short-term market noise, we maintain a net long position and anticipate a substantial improvement in R1's investment narrative within a year.

Read the full article here. Read time: 4 min