Find 100-bagger (100x stocks)! January 18, 2021 issue
Here are this week's videos
Note: The video is 34 minutes long.
1. 100 BAGGER (100x stock) candidates
3697 SHIFT
Listed on the Tokyo Stock Exchange First Section
Stock code Company Year listed
3697 SHIFT 2014
Minimum market cap (billion yen) Current market cap (billion yen) 100x market cap (billion yen)
92 2,172 9,200
Business model
Mainly engages in software testing services, offering consulting and solutions for test execution. Actively utilizes M&A.
Note: The listing year indicates the date of listing on the Tokyo Stock Exchange First Section, Second Section, Mothers, or JASDAQ.
Note: The 100x market cap is calculated from the minimum market cap.
2. Key points
1. Primarily focused on software testing services, with substantial ongoing earnings growth. Previously, tests were conducted by engineers who did development work; by having the company handle the testing process, it enables development efficiency and specialization, aligning with the current engineer shortage.
2. For this term, the forecast is revenue of 45 billion yen and operating income of 3.4 billion yen, with strong growth expected year over year. The company has an growth strategy called “SHIFT1000,” aiming for [revenue of 100 billion yen and operating income of 13 billion yen] by fiscal year 2025 to accelerate growth.
3. The company’s revenue is derived from man-month unit price multiplied by headcount, and continued strong growth in new customers and engineers keeps the growth pace robust. Moreover, it is pursuing [migration to new systems and platforms] and a new product philosophy called [DAAE (Daae)], aiming to expand beyond the testing business.
4. The reason for focusing on the company is its high growth potential achieved through M&A and significant room for expansion globally. The current P/E ratio trades above 100, and a slowdown in growth could lead to a sharp drop in stock price. Expanding business domains and overseas expansion are key to increasing market capitalization.
5. The company conducted an overseas public offering in October 2020, and as its size grows, it is becoming capable of raising funds in international markets. The increased equity ratio to 67.9% from the above offering strengthens its ability to finance acquisitions. [If growth continues at 30% annually, the market capitalization could reach 403.6 billion yen (stock price 22,882 yen) over the next five years], and the timing of purchases will be crucial.
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