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Ok, at $22 per share, I get CRNC trading at ~$785 mn market cap. Debt is about $410 mn, though they do have $110 mn in cash and equivalents. So EV is about $1,085 mn. With EBITDA at about $100 mn, we're looking at EV/EBITDA of about 11x and EV/sales of about 3.5x. None of these figures looks excessive for the very high margin revenue here, and the potential for more. In fact, it's trading for about 1.2 book value, not that I like to use that measure for software companies since they trade at stratospheric valuation on that multiple. So the stock looks reasonable/cheap, relative to traditional software companies.

But the management does warn you about hiccups in the near term. And it's very typical for spinoffs to trade well out of the gate and then crater after the first earnings report as the very same issues that management has mentioned rear their ugly heads. This was much the situation last year with FTDR, where management explained that there would be larger than expected claims for a quarter, and then the stock plummeted when it actually happened (then proceeded to double over the next year).

In any case, CRNC looks interesting and very few people are looking at it, since it's a spinoff of a small midcap, and comes in under a $1 bn market cap itself.

However, note that while the company does generate ~$100 mn in EBITDA, it generates almost no net profit, giving away about $25 mn of that in stock-based comp, and plenty goes to restructuring expenses and intangibles amortization. Given NUAN's history of stock-based comp (IIRC), I wouldn't expect that to disappear here.

Still, it looks like an interesting opportunity longer term, and it seems like it could be acquired by a larger OEM supplier at some point and integrated into their broader product portfolio. But this is just a high-level look at the financials, and I'd want to be more familiar with the business and how it would be likely to perform in a recession.

Now I need to have a look at the ENSG spinoff. That could be substantially mispriced.

Jim
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