Is it worth it to buy LatentView shares?

Latent View, Founded in 2006, is a data analytics company that caters to industries in the space of

• Technology
• Consumer Packaged Goods(CPG) & Retail
• BFSI
• Industrials

Latent View is a niche player offering services to marquee names like Uber, Adobe, and other fortune 500 companies as their clients.

It launched its IPO on November 10, 2021. The Rs 600-crore IPO comprises a fresh issue and an offer-for-sale by the promoter and other investors. Before the IPO, the promoters owned ~80% of the company which came down to ~68% post IPO

The money from the IPO was meant to be used for

1. To fund inorganic growth initiatives: Rs 147.9 crore.
2. To fund working capital requirements: Rs 82.4 crore.
3. Investment in subsidiaries to augment capital base: Rs 130 crore

At the time of the IPO, the company financials were as follows:

Considering the niche offering, business model, customer base, and growth prospects, the firm saw a 169 % premium listing at Rs 530 per share against the issue price of Rs 197 per share.

After reaching the peak of ~Rs. 754, the stock has corrected. At present, it is trading at levels above the listing price at ~Rs. 560

Having said that, let us come to the question,

Is the stock worth buying?

To answer this, let us look at some of the metrics:

• It is a debt-free company
• ROE > 20%
• P/E > 40
• Net Profit has been increasing even during the Covid-19 Pandemic
• Assets have been increasing & ROA > 15%

A few things can be stated from this:

1. High P/E is a trademark of Technology Companies
2. Traditional IT Giants like TCS, HCL, Infosys, Wipro is also competing with Latent View for the pie of Data Analytics
3. With a focus on AI, Blockchain, and Cloud Computing – the use of data analytics will be much more dominant
4. The equity holding of promoters is exceeding 50% which underlines the management’s interest in continuing to grow the company
5. The stock had corrected 35% from its 52-week high level after the lock-in period ended

Considering this, if the company is able to continue its contracts with its existing customers and bring new clients, then it can fuel growth using its expertise.

Any investor buying should be done while keeping an eye on growth, contracts, and product offerings as any small news linked to business or management can lead to volatility.

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Hope this helps. Happy Investing!!

References:

1. Data and Analytics Solution, Digital Solution Accelerators
2. Latent View Analytics Limited IPO: Opens tomorrow; key details that investors must know before investing
3. Latent View’s valuations look stretched; keep a stop loss at Rs 450, say, analysts
4. Latent View Analytics IPO: All You Need To Know
5. LatentView Listing | Bootstrapped, Profitable, Under The Radar: How Venkat Viswanathan Built This Chennai-based Analytics Firm
6. Date, Price, Company Financials, Review & Analysis.
7. Latent View Analytics slips 17% in 2 days as anchor lock-in period ends