Q: This company has run up quite a bit with a very strong RSI rating >80 so would it be wiser to wait for a pull back or buy a small portion here? Hard to answer as I know timing can't be perfect.
Lots of tailwinds for the 'security' sector and ability to use onsite cameras to do other things (eg manage project status updates, onsite manpower etc) so do you consider this a buy? What risks do you foresee in its business model as I realise small cap sizing and YTD large gains can be potential headwinds.
Thanks as always!
Lots of tailwinds for the 'security' sector and ability to use onsite cameras to do other things (eg manage project status updates, onsite manpower etc) so do you consider this a buy? What risks do you foresee in its business model as I realise small cap sizing and YTD large gains can be potential headwinds.
Thanks as always!
5i Research Answer:
The momentum is very strong here and the stock is up 6x year-to-date. Even with this, we think ZDC fundamentally looks good and can be buyable especially given the tailwinds around it. In terms of risks, ZDC extends debt to its customers, so there is some credit risk in their business model. Concentration risk is another, where 40% of total revenues were derived from the company's top three customers at year-ended 2023. Additionally, newer, larger players entering the space and stealing market share is always possible with a smaller company. We do generally like the business model and fundamentals but there are risks due to size and as identified.