Associate Vice President and Co-Portfolio Manager Paul Condrat of Davidson Investment Advisors says that FleetMatics Group PLC (FLTX) came through his firm’s process of seeking companies with good growth, profitability and valuation characteristics.
“They are a small-cap software company focused on fleet-management solutions for small businesses,” Condrat says. “If you look at fleet management as a whole, from a technology standpoint, the large companies — the long-haul truckers of the world — have great technology to help them optimize their fleets. Medium-size fleets have good technology too. But for small-business owners who typically have seven to 20 trucks within their fleets, the market is largely underpenetrated.”
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Condrat says that small-business owners are not seeing their fleets optimized for fuel-cost savings, personnel or routing. FlleetMatics, Condrat says, is growing very quickly into this area of the market.
“We think they have a dominant lead among competitors and offer a very compelling ROI for their customers. Consequently, we believe there is the potential to double their revenue over the next several years. They are expanding globally with new products, and they still trade at a very reasonable valuation. For a company of this size, it’s very profitable, with 75% gross margins and 30% EBITDA margins,” Condrat says.
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