LSI Software S.A. develops software for retail and hospitality applications. It offers professional, implementation, and maintenance services; hardware solutions; and enterprise resource planning system. The company was founded in 1991 and is headquartered in Lodz, Poland.

Poland

LSI Software S.A.

Technology

The company pays dividends irregularly. There have only been a few years with dividend payments in the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. 

LSI.WA reported revenue of PLN 67mn in the last 12 months, up 17% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 81% from FY23 to PLN 1.81.

The stock has been growing steadily in the past six months, adding 21% in total. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 22ppts in total. At the same time, the stock's performance relative to its the peers from the same country and sector is different. It underperformed these peers by 1ppts over six months and grew 17ppts faster in the past month. With respect to the stock's valuation against its peers, its overall price performance is 'fair'.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 18.4% in the last 12 months, up from 12.0% in FY22. 

Historically, LSI.WA has reported average net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 8.7%, a growth from 4.7% in FY22. 

In the last 12 months, the return on capital employed (RoCE) grew to 10.2%, below the peers. 

LSI Software S.A. reported a return on equity (RoE) of 11.1% in the last 12 months, up from 5.7% in FY22. 

Another important profitability metric, return on assets (RoA), amounted to 8.3% in the last 12 months, an increase from 4.4% in FY22. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.3 in the past several years. This ratio implies a average shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

LSI.WA has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is very unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a tiny market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry.

In highly turbulent market conditions, LSI.WA is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, LSI.WA is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to minimal. 

Considering past and projected metrics, the stock is distinctly 'cheaper' than its peers. In particular, the stock is underpriced on P/E, 'cheap' on EV/EBITD. 

LSI Software S.A.

PLN 19.1

4

LSI Software S.A.

PLN 19.1

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

PLN 19.1

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