Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Model N, Inc. is a provider of cloud revenue management solutions for life sciences and technology companies. The company's revenue management solutions division is where it develops and makes money. As a system of record for critical revenue management procedures including pricing, quoting, contracts, rebates, incentives, channel management, reporting, and regulatory compliance, it offers solutions that cross organizational and operational boundaries of areas like sales, marketing, and finance.

1.2 The Key Positives, Negatives, and Investment summary

 

1.3 Key Metrics:

A higher current ratio for the company suggests more short-term working capital liquidity. It also proves that a business has access to sufficient liquid short-term assets to pay down all current short-term debt, if necessary. Further, the SaaS ARR has grown by 36% year-over-year to reach an all-time high of USD 115.8 million.

1.4 Top 10 shareholders:

The top 10 shareholders together form ~59.11% of the total shareholding, signifying concentrated shareholding. Conestoga Capital Advisors, LLC, and Neuberger Berman, LLC [Activist], are the biggest shareholders, holding the maximum stake in the company at ~10.00% and ~7.94%, respectively.

Section 2: Business Updates and Corporate Business Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

 2.2 Insights of Q1FY23:

Section 3: Key Risks & Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

The stock is down 16.57% in the past 1-month, down 0.8% in 3-month. The stock is currently between its 52-week range of USD 43.18 and 52-week low price of USD 20.95. Following the release of Q1FY23 results, the stock has already corrected by 13.16%. Currently, the price is currently near a decent support range of USD 32.00- USD 35.00, and if the price stays above this range, an upward momentum can be expected towards the intrinsic value. The price is currently trading between its long-term (200-day) SMA and its short-term (50-day) SMA, with the current RSI of 31.07.

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 15, 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

 Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

 Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.

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