+40 % growth at 7× EBIT: a Swedish growth gem with a 90 % gross margin
Full Intellego report (30 pages)
This company exemplifies how a razor-and-blade business model can generate substantial returns. I first initiated coverage on October 28, 2024, and since then the stock has gained an outstanding 345.1 percent. Despite this run-up, I remain bullish: growth prospects have improved, and the shares still trade at roughly the same valuation metrics as when I first discovered them, with all of the expansion coming organically. Trading at SEK 100, my valuation model points to a fair value of SEK 213, in line with the CEO’s warrant strike price.
Let me run you through the numbers. We have a business that could grow revenue at a 50 % CAGR—or more—over the next five years, with ~90 % gross margins, is already profitable, and trades at just 7× EBIT. Many problems have appeared in the past, but month after month the company has delivered results that address the short-seller arguments. Combining this growth with a potential multiple re-rating to 20–25× EBIT—appropriate for a company of this quality—Intellego presents an extraordinarily interesting investment opportunity.
On July 4 the company beat its full-year profit guidance for the second consecutive time and is now consistently under-promising and over-delivering. I initially flagged Intellego as a possible ten-bagger; so far it has been more than a four-bagger, and current trends suggest we could see that 10× increase—or even more. With the thesis now more mature, we may have an attractive entry point into the company.
I have put this piece together so new readers have all the information in one place and to add some thoughts. In this in-depth analysis I include my original initiation report, the update I published after the stock tripled, my rebuttal to a recent short-seller report, additional comments on recent developments and their impact on valuation, and observations on how to capitalize on the stock’s pronounced volatility.
If you are a shareholder or are considering becoming one, you will find it hard to locate such comprehensive, independent analysis of the company and how it has evolved over time.