YB new stock pitches (Tue, Mar 11)

Nedap N.V. (NEDAP.AS) is a Dutch software/hardware company transitioning to a software-driven model, with recurring revenue growing at a 17% CAGR since 2019 and now accounting for 40% of total revenue. The company dominates four key markets: Livestock Management (40% global market share), Healthcare (60% market share in elderly care), Security (36% of top European organizations as clients), and Retail (RFID-based inventory management for global retailers). Nedap's overall revenue has accelerated to an 8.6% 3-year CAGR, with profits growing faster than revenue. The company's products are deeply integrated into clients' operations, resulting in high switching costs and strong customer retention. Despite this transition and market leadership, the stock is believed to be undervalued, as the market may still perceive Nedap as a traditional hardware business. All four authors of the pitch own shares in Nedap, reflecting their confidence in the company's potential.

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TOW Co., Ltd. (4767.T) is an event planning company with a 30-year track record, trading at a PBR of 9x and a P/E of 9x. The company has net cash accounting for 50% of its market cap, a 4.8% dividend yield, and a 40.5% payout ratio. As the No.1 company in its field, TOW is expanding its client base beyond major advertising agencies and has a solid order backlog. The company aims for growth through client and business area expansion, with a conservative 10x P/E valuation and an ROE of 13-15%. TOW demonstrates a strong focus on shareholder returns, maintaining a minimum 4.5% dividend yield policy. Key risks include rising labor costs, which the company is addressing through efficient human capital management. With its current valuation, strong cash position, and growth potential, TOW appears undervalued at 9x P/E.

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Text S.A. (TXT.WA), a Polish SaaS company specializing in customer communication solutions, is currently trading at attractive valuations with 6.7x EV/EBIT, 7.6x P/E, and a 12.7% FCF yield. The company boasts impressive financials, including an 80.3% gross margin, 51.5% operating margin, and 9.4% MRR growth. Despite declining customer numbers and intense competition, TEXT's rising ARPU and product diversification provide some protection. Risks include a strategic pivot to a bundled Suite approach, marketing strategy limitations, and potential margin compression. Even in a pessimistic scenario projecting a 14% revenue decline and 35% operating margin in three years, the downside is limited to approximately 14%. The company's strong financial position, high margins, and recurring revenue model provide a buffer against potential challenges, making it an undervalued opportunity even if it fails to execute perfectly.

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