Momentum is crucial across many walks of life. Not least politics, sports and the economy. However, for rapidly expanding tech firms it is one of the most important KPIs, particularly when it comes to orderflow and ultimately achieving sector dominance. On Tuesday (7th), Kromek certainly did not disappoint. Saying that it “expects to report revenue growth for the full year 2018/19 and EBITDA profit in-line with market expectations.” Implying a strong H2’19, partly aided by £1.5m-£2.0m of shipments which were deferred from H1’19, due to the relocation of US production to a new medical grade, manufacturing facility in Pittsburgh. I guess we shouldn’t be too surprised though, since Kromek has delivered 33% top line CAGR since FY13.
Additionally, after raising £21m (£19.9m net) in February at 25p/share, we suspect there is also a decent chance that a similar pace of growth can be maintained over the next 6 years. Albeit prudently we have baked much slower growth rates into our estimates.
Highlighting once again the upside potential for investors of this ‘category champion’. An IP/science rich business that develops next generation gamma and x-ray detectors for the multi-$bn medical imaging, homeland security and nuclear screening industries.
Indeed hypothetically, if Kromek delivered 33% CAGR until FY24, then our valuation would rise from 35p today to >75p. Not an implausible outcome either, considering it “continues to gain traction in all its segments with the award of high-value, multi-year contracts from its commercial and large government customers worldwide. Plus, the Board continues to look to the future with confidence.”