Special-purpose software vs. general-purpose
Everbridge, Inc. (NASDAQ:EVBG) builds and operates computer software as a service, as described by Yahoo Finance:
“Everbridge, Inc. operates as a software company in the United States and internationally. The company’s Critical Event Management, a software as a service based platform with various software applications that address tasks an organization has to perform to manage a critical event, including Mass Notification that enables enterprises and governmental entities to send notifications to individuals or groups to keep them informed before, during, and after natural or man-made disasters, and other emergencies; Safety Connection that enables organizations to send notifications based on last known location of an individual; Incident Management for organizations to automate workflows and make their communications relevant; and IT Alerting that enables IT professionals to alert and communicate with members of their teams during an IT incident or outage. Its software applications also include Visual Command Center that enables customers to monitor and integrate threat data, as well as information on internal incidents; Public Warning that is used to reach international mobile populations; Community Engagement that integrates emergency management and community outreach; Crisis Management that provides mobile access to crisis, recovery, and brand protection plans; Risk Intelligence that aggregates data to assess incidents and provide incident information and analysis; and Secure Messaging for employees to communicate and share nonpublic information. The company provides customer support services. It serves enterprises, small businesses, non-profit organizations, educational institutions, and government agencies in technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, higher education, and professional services industries. The company was formerly known as 3n Global, Inc. and changed its name to Everbridge, Inc. in April 2009. The company was founded in 2002 and is headquartered in Burlington, Massachusetts.”
A little-known software company
Why isn’t EVBG as well-known as Microsoft (NASDAQ:MSFT)? Their particular focus on customers’ specific needs may be the answer. It is suggested by the nature of their stockholders:
When over 50% of your shares are owned by 7 institutions, and they and others are eager to buy another 8% of shares shorted by unbelievers, there seems to be adequate long-term acceptance in the investing community without much need for additional enthusiasm by individual public investors at large.
One revealing sign is that a mouse-click on the EVBG website is greeted by this response:
A clear sense of corporate mission
The focus is on critical event management. Do you see in the marketing “survey” funnel to “Bridgette” any receptacle for an investor relations department? Maybe they don’t even have one, as such.
But no need, as we perform our usual daily scan of the derivative securities markets to find what are the current most promising near-term equity investments. Those clues appear in our Market-Makers’ [MM] current-day price-range forecasts for over 2,700 widely-held and actively-traded stocks and ETFs.
The price-range forecasts are the natural implications of hedging actions taken to protect market-making-firm capital put necessarily at risk to “fill” multi-million-dollar trade orders by institutions like those noted above.
The advantage of a price-RANGE forecast instead of just a price-TARGET forecast is that there is a sense, and recognition, of RISK in the forecast. All of our daily measures of forecasts have this essential dimension.
Reward-Risk appraisals of the competition
Here is how the reward-risk balances currently appear for several computer software applications stocks.
This map locates securities at the intersection of prospective price gains (green horizontal scale) and potential price drawdowns (red vertical scale) based on market-maker hedging behavior to protect their necessary endangerment of firm capital as they enable volume trades. Desirable conditions are down and to the right.
While Figure 1’s comparisons provide a perspective on many of this group’s alternative investment candidates, several conditions contribute to reward and risk. Principal questions for both are “how likely are these to happen”, and “can their impact be improved?”
A more detailed evaluation
In our May 22 rankings, EVBG pops up near the top (unusually) as having great attraction. Which often signals that institutional attention and interest is growing among the big-dollar buyers crowd.
Figure 2 presents the MMs’ price range forecasts for those alternative investment candidates in Figure 1. As well, with the histories of all outcomes from forecasts of the same proportions of up-to-down prospects in the past 5 years of daily forecasts as those of today.
This table presents data on the stocks most likely to produce satisfying RATES of capital gain under the portfolio management discipline known as TERMD, explained by article How To Better-Than-Double Your Capital Gains (From Stocks Alone) By Using TERMD Portfolio Discipline in my SA blog.
That discipline seeks the largest, most likely, quickest to be captured net capital gains with the least interim exposure to price drawdown on the way to target reward attainment.
Contributing to that evaluation are the demonstrated odds of a profit-successful forecast in column [H], its complement of 100 – H, or loss frequency, size of net gain attained [ I ] and size of worst loss experience [F] so that when appropriately weighted in [O] and [P], they produce the Net of [Q]. Respecting the power of compounding, [Q] converted into basis points per day [J] of capital commitment at [R] presents a highly comparable figure of merit (fom) for investing preferences.
Figure 2 is row-ranked on [R]’s figure of merit (fom) and distinguishes EVBG’s capital gain prospects from nearly all of the others. A few candidates are expelled by inadequate prior forecast sample sizes highlighted in pink. MSFT on this scale is only just ahead of the also-rans.
An important part of the valuation is the role of TIME. EVBG is seen as able to capture a 14%-15% capital gain with a high (94/100) likelihood in little more than a month of 21 market days. Street estimates of MSFT next 5-year trend CAGR are 15% per year, and year from now only +5% to 6%.
EVBG’s CAGR street growth estimate is in triple digits. Its MM forecast concurs, at rates now above many of their current forecast population’s 10 best odds issues, in either CAGR or basis points per day [R] measures.
Recent trend of MM price range forecasts
Figure 3 pictures the past 6 months of daily MM implied price range forecasts. The vertical bars plot the price ranges, with a heavy dot at the market’s quote on the date of the forecast. It splits the range into upside and downside coming price change prospects.
Please note the decline in market quotes of the past two weeks has significantly expanded EVBG’s upside change potential from where it was after its last sharp rise. The forecasts did not decline as much as did price.
Everbridge, Inc. appears to be a highly attractive current capital gain prospect. Its long-term corporate mission of Critical Event Management has a wide field of major corporate businesses now in need of their capabilities as business and commerce return to more normal activities in recovering from the COVID-19 pause.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in EVBG over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclaimer: Peter Way and generations of the Way Family are long-term providers of perspective information, earlier helping professional investors and now individual investors, discriminate between wealth-building opportunities in individual stocks and ETFs. We do not manage money for others outside of the family but do provide pro bono consulting for a limited number of not-for-profit organizations.
We firmly believe investors need to maintain skin in their game by actively initiating commitment choices of capital and time investments in their personal portfolios. So, our information presents for D-I-Y investor guidance what the arguably best-informed professional investors are thinking. Their insights, revealed through their own self-protective hedging actions, tell what they believe is most likely to happen to the prices of specific issues in coming weeks and months. Evidences of how such prior forecasts have worked out are routinely provided in the SA blog of my name.