vo2macs

ClickSoftware Technologies: Smallcap Value Investment

While it is good that free cash flow is growing for any company, I don't think that it should be used for this small company that is trying to grow quickly, grow and maintain market share and grow and maintain their technological advantage over the competition. It is more important for a growing company, IMO, to spend money on technological improvements that have a positive rate of return (hopefully - of course), R&D,capital improvements and sales and marketing efforts.

The trick in doing a valuation is ferreting out the difference between what a company is merely spending what they should be to stay in business and be competitive and what they are investing in to grow and beat the competition (the difference between the two costs).

There are some things that can't be determined in a small business without actually questioning the CFO or accountant after spotting something in the income statement or balance sheet. An example would be where a small company expensed out the entire purchase of what should be considered a capital improvement (say rigid shelving for the warehouse for example) in one year. Here you may have the shelving going into COGS in addition to 20% of the cost basis being depreciated in the same year and four more years. A mistake, of course, but I have seen it happen.

What I like about Click Software is that while they are doing all of the above they are also growing ttheir cash position year over year. As a matter of fact, their cash position is ludicrously high for a company with their "market value". A company like IBM or SAP would be well advised to take them out strategically for the IP and market share and put the cash to better use.

ClickSoftware Technologies: Smallcap Value Investment

What growth rate are you assuming? The only growth you refer to in your definitions is growth in operating fixed assets. Are you referring to growth in earnings?