r/valueinvesting
Cheap growth: $PRCT
Author compares PRCT's early financials and valuation to ISRG, seeing significant upside potential despite a recent revenue guidance cut.
- Revenue has quadrupled since 2022 with expanding gross margins, showing true economies of scale.
- Trades at a much lower 4.5x sales multiple compared to ISRG's 9-18x at the same revenue stage, offering significant multiple expansion potential.
- Explosive revenue guidance for 2027 is currently discounted by analysts, leaving room for positive surprises.
- The company guided revenue down against expectations for the current year, indicating potential execution risks.
- It is difficult to accurately predict the performance of a young company, and a disaster could lead to multiple de-rating.
I had never heard of this company until last week. Procept Biorobotics is a surgical robot company. Revenues have quadrupled since 2022. Gross margin has expanded with revenues which demonstrates true economies of scale.
It is very hard to really predict how a young company like this will perform. What I did is go back to ISRG and look at how that company executed from the same revenue base PRCT has today.
Halfway through 2006, ISRG crossed the $300mm revenue threshold that PRCT hit last year. ISRG had the same gross margin then as PRCT has today. ISRG had almost $600mm of capital on the balance sheet then. PRCT has $450mm of capital today.
ISRG was traded at 9-18x sales (very rocky period for ISRG stock price). PRCT trades at 4.5x sales.
All of these data points are incredibly encouraging. PRCT is growing faster than ISRG at the same stage of existence and trading at a lower multiple. IF PRCT can execute similar to ISRG, the potential for multiple expansion is significant. Combine a price/sale multiple doubling with 30% revenue growth and the stock can rise 150% over 3 years without blinking.
The only red flag is that Procept guided revenue down against expectations (still up 30%) for this year. However, the revenue guidance for 2027 is explosive. Analysts do not believe it. That leaves a huge upside surprise on the table. If the analysts end up being right, there is still 25% revenue growth. It is unlikely for the price/sales multiple to de-rate much more without some disaster (which is always possible).
growth has slowed materially
how will they turn profitable and stay afloat? feels like there's a high risk of share prices cratering and not being able to issue more shares for cash - e.g., high risk of running out of cash
you need to have a catalyst that drives margin expasion. at this point, opex is growing faster than revenue
No thanks. A 4x return since 2022 sounds impressive, but that's in the past...
what matters now is that their revenue growth has been decelerating since 2022. Slower growth often leads to multiple compression, which can make it harder for the stock to deliver strong returns from here
https://www.marketdatafyi.com/ticker/2269/NASDAQ/PRCT?type=company&cid=2269&active-panel=financials
im not sure if your a bot or not but ill look into this
beep boop bop not a bot. Look at my history.
also have you bought any and why do you think now is bottom
oh yea sorry there is a lot of pump and dumps on subreddits
One thing worth highlighting that often gets overlooked with PRCT — it’s not just the negative net income, it’s the cash flow situation that concerns me more. A company can have negative net income and still be fine if operations are generating cash. But when operating cash flow is also negative, you’re essentially watching the cash reserves burn down quarter by quarter.
For anyone wanting to dig into the numbers, https://analyze.company/prct has their full cash flow history if you want to see the trend visually.
Always important to look at this with a young company. $245MM net cash on the balance sheet, burning about $50-60 per year. Positive EBITDA in 2028 expected.
Looks ok to me.
That’s reassuring on the cash front. Personally I always want to see positive operating cash flow before getting comfortable with a position — it means the core business is self-sustaining regardless of what’s on the income statement. Will keep watching their quarters.