I have collaborated with Newgen in one of my companies I used to work with. They basically provide an electronic document management system which is a highly competitive space. It also reflects in the lower margin. An EBITDA of 20-22% for a product business is not exciting to me.
That said they are in a growing market as globally there is an increasing push towards digitalization of paper based back-office processes (especially in government offices).
If Newgen can grab and sustain even a small market share, the growing pie gives them a long runway. Expansion in topline should also give them some operating leverage, adding a few percentage points to the operating margin. But despite all this 60+ p/e stock currently trades at is too high.
| Subscribe To Our Free Newsletter |
