Report

‘Disruptive’ US tech firm set for banner 2019

ClearStar is an Atlanta HQ’d tech firm that is disrupting the $4.0bn-$4.5bn employment & medical (MIS) screening sector. Here, we think its leading cloud hosted mobile/desktop solutions - including biometrics/facial recognition – could even eventually become the industry’s de facto standard. Replacing less efficient & more time-consuming background checks with much faster, IT-centric customer/user-friendly and fully automated applications.
Encouragingly, this ‘competitive advantage’ is visible in results as today’s update shows, with 2018 sales climbing 13% (15% H2 vs 11% H1) to $20.1m (vs $17.8m LY) thanks to impressive performances from Direct (up +28% to £5.9m) and Medical (+25% to $8.2m).
Together these 2 divisions (excluding MIS overlap) now account for c. $12.9m of 2018 turnover, or approx. 64% of the group. However, we predict this will rise to c. $16.2m (or c.70%) in 2019 – thus further propelling LFL growth in 2020 in line with improving mix.
From a risk perspective, forward visibility is excellent with c.95% of revenues derived from everyday recurring tests, complemented by a robust balance sheet (ED estimated net cash >$1m Dec’18) and >90% of the business coming from North America (re minimal exposure to BREXIT and/or £ weakness). Additionally we don’t see an imminent US recession either, since rarely does GDP turn negative in the 12-24 months preceding a Presidential Election (Nov’20).
Like CEO Bob Vale says, we believe that the stock has reached an “inflexion point… and look to the future with confidence.” In fact, given the higher growth projections, we have upgraded both our 2019 revenue forecast to $23.1m (delivering EBITDA of $950k & cashflow breakeven) vs $22.8m, and valuation from 120p to 135p/share. Reflecting potentially >100% upside for patient investors vs today’s price.
Underlyings
EQUIFAX INC.

Equifax Inc. is a provider of information solutions and human resources business process outsourcing services for businesses, governments and consumers. The company's services are based on databases of consumer and business information. The company uses statistical techniques, machine learning and proprietary software tools to analyze all available data, creating insights, decision-making solutions and processing services for its clients. The company also provides information, technology and services to support debt collections and recovery management. Additionally, the company provides payroll-related and human resource management business process outsourcing services in the United States of America.

FAIR ISAAC CORP

Fair Isaac is a provider of analytic, software and data management products and services. The company's segments are: Applications, which includes pre-configured decision management applications designed for business problem or process, such as marketing, account origination, customer management, fraud, collections and insurance claims management; Scores, which includes its business-to-business scoring solutions and services, its business-to-consumer scoring solutions and services including myFICO? solutions for consumers, and associated services; and Decision Management Software, which is composed of analytic and decision management software tools and the company's FICO? Decision Management Suite.

Fiserv Inc.

Fiserv is a provider of financial services technology. The company provides account processing systems, electronic payments processing products and services, internet and mobile banking systems, and related services. The company's segments are: First Data, which provides merchant acquiring, e-commerce, mobile commerce, and other business solutions; Payments and Industry Products, which provides electronic bill payment and presentment services, internet and mobile banking software; and Financial Institution Services, which provides financial institutions with account processing services, item processing and source capture services, loan origination and servicing products, and cash management, among others.

GB Group PLC

GB Group is engaged in the provision of identity data intelligence services. Co. has two operating segments: Identity Proofing, which provides electronic ID Verification services for combating ID fraud, money laundering and under-age gambling, ID Employ & Comply services for employee authentication and screening, and ID Fraud & Risk Management services; as well as Identity Solutions, which provides ID Registration, ID Engage and ID Trace & Investigate software and services that provide consumer information and facilitate understanding, targeting and retention of profitable consumers. Between them, the segments have six complementary lines of business including ID Verification and ID Engage.

Ideagen

Ideagen is a supplier of information management software to regulated industries. Co. supplies Governance, Risk and Compliance solutions principally to the Healthcare, Transport, Aerospace & Defense, Life Sciences, Manufacturing and Financial Services sectors.

Insperity Inc.

Insperity provides a range of human resources (HR) and business solutions. The company's HR services offerings are provided through its Workforce Optimization? and Workforce Synchronization? solutions, which encompass a range of human resources functions, including payroll and employment administration, employee benefits, workers' compensation, government compliance, performance management, and training and development services, along with its cloud-based human capital management platform, its Insperity Premier?. In addition to its Professional Employer Organization HR Outsourcing solutions, the company provides Workforce Acceleration?, a payroll and human capital management solution.

Paychex Inc.

Paychex is a provider of integrated human capital management (HCM) solutions for payroll, benefits, human resource (HR), and insurance services for small- to medium-sized businesses. The company's portfolio of HCM and employee benefit-related services include: payroll processing services; payroll tax administration services; employee payment services; regulatory compliance services (new-hire reporting and garnishment processing); HR Solutions Administrative Services Organization; retirement services administration; HR administration services, including time and attendance; other HR services and products; business services; Professional Employer Organization services; and insurance services.

TransUnion

TransUnion is an information and insights company. The company provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses. The company has the following reportable segments: United States Markets, which provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses; International, which provides services similar to its United States Markets segment to businesses in select regions outside the United States; and Consumer Interactive, which provides solutions that help consumers manage their personal finances and take precautions against identity theft.

Wolters Kluwer NV

Wolters Kluwer operates through four divisions: Health is a global provider of information for medical and health professionals; Financial & Compliance Services is a U.S. provider risk management, compliance, finance, and audit professionals the services they need to optimize risk and business performance, and ensure compliance with local, regional, and global regulation; Tax & Accounting is a provider of tax, accounting, and audit information, and services; and Legal & Regulatory provides customers with expert content, software, and services in the areas of law, business, and regulatory compliance in Europe, North America and Asia Pacific.

Provider
Equity Development
Equity Development

​Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.

Analysts
Paul Hill

Other Reports on these Companies
Other Reports from Equity Development

ResearchPool Subscriptions

Get the most out of your insights

Get in touch