is this a decent entry point for each? if not, what price would be a more reasonable entry point?
cheers, Chris
In general, the smaller the company, the more risk is involved, across a variety of spectrums. But depending on one's definition of risk, with certain companies that have low valuations and good fundamentals, it can be argued that these names have more downside protection than others. HPS.A has a forward P/E of 15.3X, which is reasonable given its growth profile and healthy balance sheet. LMN has a forward P/E of 32X, and this is based on an estimated $0.97 EPS for FY2024. LMN is a relatively new public company, and thus we are more focused on its forward price-to-sales multiple at this time (2.3X).
We continue to like both names, and LMN has recently made an acquisition of Nokia's device management and service platform businesses, which we feel has further strengthened its long-term prospects. HPS.A is at a good valuation, has been growing fast, and has been consolidating over the past couple of months. We would be comfortable buying either of these names today, while acknowledging small cap risks and the potential for pullbacks along the way.