That is one detailed review. Thanks for this! I am maybe a little too deep in this stock, see you in 2 years, hopefully we can look back on this moment as a genius call 😎
What are your thoughts on Q4 earnings in regards to the thesis evolution ab is a high growth company? I have evolution on my radar too, yet I read a comment by Alan Galecki about a week ago on X that hinted on its growth days coming to an end. Since then I had to discipline myself not to “buy the dip” as I currently lack time to look deeper into the validity of that statement. Yet a quick check sees growth coming down to 14% underpinning the assumption.
A dividend is hard cash. Growth is potential and not fixed. I agree with the amount, could scale back the amount , unless they know something that we don't?
Very nice and detailed analysis, bravo! What are your thoughts on the ongoing class action lawsuit against Evolution in the US? The lawsuit accuses Evolution of misleading investors by making untrue or misleading statements about various aspects of its business, including its growth potential, customer compliance, and the impact of non-compliance on revenue. On another note, I do not understand how EVO can have gross margins of 100% and higher. How is this possible?
Thanks! Unfortunately I think class action lawsuits are a cost-of-business expense for Evolution. The company sells its games to casino operators but this industry can be a bit shady, and I'm not too surprised that EVO's games sometimes end up in the hands of non-compliant operators. At worst I could see them getting fined over the US accusations, probably not much more than that. Regarding gross margins - where did you see them at 100%? EVO doesn't share details on COGS, so it's not possible to calculate gross margin.
Focus on revenue/FCF growth progression, this is all the market cares about. Growth alone isn’t enough. The market assumes the last 2-3 years of growth will keep going. Until 2021, revenue was growing 50%+ (90% in 2021), and the valuation was 30 P/S, which didn’t make sense. Growth slowed in 2022-2024, and now the P/S is 7. Back then, it was “great business, deserves high multiples.” Now, it’s the opposite. Narrative follows price, typical market behaviour. The market fixates on growth and is now blaming Asia, UK, Georgia etc., for the slowdown. But maybe it’s just that the company has reached a size where it can’t grow as fast anymore.
Thanks for sharing, this is definitely a possibility. Law of large numbers means it's incredibly hard to keep growing at 50% for many years in a row. I think consistent 10% growth and expanding margins is more than enough for an incredible investment at a multiple of 14. The question is, can they maintain 10% growth for more than 2-3 years?
@@ratedaco Their market is expected to grow at 12% a year over the next decade, and they’re the leaders in it. Challenges like strikes, the Asian market, regulations, etc., apply to their competitors too, probably even more so since those smaller players have less financial flexibility to deal with setbacks. After the last conference call, I was honestly amazed that they were still growing at 15% year-over-year despite studio strikes, issues in the Asian market, etc. It feels like everyone has already forgotten about all that.
That is one detailed review. Thanks for this! I am maybe a little too deep in this stock, see you in 2 years, hopefully we can look back on this moment as a genius call 😎
The deeper you are, the more important it is to think of what could go wrong!
Fantastic video ive got my eye on this one. Even more so now!
Thanks for sharing!
What are your thoughts on Q4 earnings in regards to the thesis evolution ab is a high growth company? I have evolution on my radar too, yet I read a comment by Alan Galecki about a week ago on X that hinted on its growth days coming to an end. Since then I had to discipline myself not to “buy the dip” as I currently lack time to look deeper into the validity of that statement. Yet a quick check sees growth coming down to 14% underpinning the assumption.
If by growth you mean > 25% revenue growth, then I probably agree with that statement!
Really thorough review
I wish they didn’t pay a dividend and used that money for their growth strategy opening more studios
Or buying back shares, at this level!
A dividend is hard cash. Growth is potential and not fixed.
I agree with the amount, could scale back the amount , unless they know something that we don't?
Very nice and detailed analysis, bravo! What are your thoughts on the ongoing class action lawsuit against Evolution in the US? The lawsuit accuses Evolution of misleading investors by making untrue or misleading statements about various aspects of its business, including its growth potential, customer compliance, and the impact of non-compliance on revenue.
On another note, I do not understand how EVO can have gross margins of 100% and higher. How is this possible?
Thanks! Unfortunately I think class action lawsuits are a cost-of-business expense for Evolution. The company sells its games to casino operators but this industry can be a bit shady, and I'm not too surprised that EVO's games sometimes end up in the hands of non-compliant operators. At worst I could see them getting fined over the US accusations, probably not much more than that.
Regarding gross margins - where did you see them at 100%? EVO doesn't share details on COGS, so it's not possible to calculate gross margin.
I think the stock went down cause the market expects the SEK/USD conversion rate to get worse over time..
I think a weaker SEK would actually push the stock price up.
Focus on revenue/FCF growth progression, this is all the market cares about. Growth alone isn’t enough. The market assumes the last 2-3 years of growth will keep going. Until 2021, revenue was growing 50%+ (90% in 2021), and the valuation was 30 P/S, which didn’t make sense. Growth slowed in 2022-2024, and now the P/S is 7. Back then, it was “great business, deserves high multiples.” Now, it’s the opposite. Narrative follows price, typical market behaviour. The market fixates on growth and is now blaming Asia, UK, Georgia etc., for the slowdown. But maybe it’s just that the company has reached a size where it can’t grow as fast anymore.
Thanks for sharing, this is definitely a possibility. Law of large numbers means it's incredibly hard to keep growing at 50% for many years in a row. I think consistent 10% growth and expanding margins is more than enough for an incredible investment at a multiple of 14. The question is, can they maintain 10% growth for more than 2-3 years?
@@ratedaco Their market is expected to grow at 12% a year over the next decade, and they’re the leaders in it. Challenges like strikes, the Asian market, regulations, etc., apply to their competitors too, probably even more so since those smaller players have less financial flexibility to deal with setbacks. After the last conference call, I was honestly amazed that they were still growing at 15% year-over-year despite studio strikes, issues in the Asian market, etc. It feels like everyone has already forgotten about all that.
😅