Band Goran Damchevski
This article originally appeared on Simply Wall St New
Paltalk (NASDAQ: PALT) is a video conferencing technology company that recently experienced a sudden rise in prices. We were interested if this stock warrants further consideration, so we reviewed the fundamentals and their business model. Needless to say, this is a very high risk stock and potential investors should try to get as much information as possible before making a decision.
Paltalk’s product portfolio includes Paltalk and Camfrog, which together host collections of video-based communities. Their products include Tinychat and Vumber. The company has more than 20 years of technological innovation history and holds 18 patents.
Most of the company’s revenue comes from subscriptions that allow users to upgrade their Paltalk account, which extends access and unlocks status.
Although small, Paltalk is a profitable company, and in his latest quarterly report, the CEO pointed out that this was their 4th consecutive quarter that they are generating positive cash flow:
“Paltalk continued to deliver strong results in the first quarter of 2021; in fact, this is the fourth consecutive quarter in which we have recorded positive earnings and cash flow, continuing a trend first established in mid-2020 after our strategic shift to focus on our core applications multimedia social “, Jason katz, CEO and President of Paltalk, Inc.
The app itself is very reminiscent of the old technology of the Skype era. It seems that even though the company has made progress in development and holds technology patents, it will need a lot of further development before it can compete with conference competitors like Courageous, Zoom (NASDAQ: ZM), MS teams (NASDAQ: MSFT), Discord, Twitch (NASDAQ: AMZN) etc.
In our fundamental review, we will focus on the company’s cash flow capacity and revenue growth.
The company has a very good asset structure, with no long-term debt and $ 6.5 million in cash. Considering that their the turnover for the last twelve months is US $ 13.5 million, it seems they have a good share in cash.
The graph also shows the stability of their cash balance over the years. This can be used to fund future projects, if management believes there is a branch that is worth pursuing.
Alternatively, the high cash position can make it a target for acquisition by an entity that thinks it can improve the business.
Companies with high liquidity and little or no debt can become targets of LBOs or activism, if the acquirer believes: the company is poorly managed, has a bad capital structure or is insufficiently pursuing profits.
This is not an analysis that can reveal whether Paltalk is a candidate for acquisition, as it would require exploring the articles of association and checking anti-acquisition provisions and other repellants.
Are Paltalk’s revenues increasing?
While it’s not that surprising, we still think the 16% increase in operating revenue was positive. In reality, this article does only a brief study of company growth data. This graph of historical earnings and earnings shows how Paltalk is developing its business over time.
How easily can Paltalk raise funds?
Despite Paltalk’s revenue growth, it’s still important to consider how it might raise more money, if needed.
Paltalk has a market cap of US $ 72 million, which has been very volatile in recent days. If the company issues new stocks with a high market valuation, they will increase much more liquidity than they would have done just a few days ago.
Key points to remember
Investors should be wary of rapid price jumps because they are not always linked to fundamentals. In our analysis, we found Paltalk to be an interesting, but somewhat outdated, public video conferencing technology company.
Paltalk is in a good cash position and profitable. However, the lack of progress over the past 5 years calls for caution, as there may be long-standing obstacles to meaningful growth in the company.
An aggressive investor may decide to buy more of the business, and we’ll need to take a close look at how Paltalk can compete with the businesses that were successful in winning the video conferencing boom of 2020, before approaching it as an investment. viable in the long term.
That being said, volatility can be great for short term traders.
Diving deeper, we spotted 4 warning signs for Paltalk you need to be aware of it, and one of them is important.
If you prefer to consult another company with better fundamentals, don’t miss this free list of interesting companies, which have a HIGH return on equity and low leverage Where this list of stocks that should all grow.
Simply Wall St analyst Goran Damchevski and Simply Wall St have no positions in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.