If you’re concerned about Brexit, Sterling’s devaluation, currency wars and/or the slowing global economy, then look no further than Uncle’s Sam’s backyard. To us, America remains the ‘destination of choice’ for many investors, given its resilient consumer (>70% GDP), low unemployment (3.7%), solid GDP (2.1% Q2’19) and muted inflation (CPI 2.1%). The only problem is finding the right companies to buy at attractive levels. Step forward ClearStar, a tech-enabled background & medical (MIS) screening expert, based in Atlanta (Georgia), serving almost exclusively the US domestic market (c. 95% sales).
Today the firm said that it had backed up June’s “highest ever monthly revenue (ED est +29% organic)” with another blistering performance in July. In fact, not only did MIS break the $1m barrier for the 1st time, but also we estimate total revenues climbed approx 26%-30% LFL to $2.25m.
Here growth is being driven by the firm’s best-in-class mobile software, onboarding of clients, contract wins and up/X-selling. Augmented by favourable macro tailwinds, the ongoing popularity of the gig economy, crackdowns on illegal workers & legalisation of cannabis for recreational use.
Consequently we are becoming increasingly confident that CLSU will hit (or perhaps even exceed) our conservative FY19 revenue forecast of $23.0m (14.4% LFL). Indeed, we reckon July YTD sales came in at c. $13.8m, leaving $9.2m for the rest of the year, representing an average run-rate of $1.85m/month. Plus, if this momentum can be maintained, then there should be scope for upgrades as the period progresses.