FIO

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Reducing Our Fair Value Estimate on Fusion-iO on Lower Gross Margin Expectations

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Fusion-iO (FIO), one of the more controversial companies in our coverage universe, posted fiscal second quarter results last Tuesday. As we pointed out to investors in this note, the firm could be a revolutionary company with a very bright future. However, due to a weaker gross margin outlook as well as share dilution from the December secondary offering, we have lowered our fair value estimate on Fusion-iO to $15 per share, significantly lower than its mid-$20s price tag currently. Our biggest concern about the firm is deteriorating levels of profitability. For one, Fusion iO’s gross margin in its fiscal second quarter came in very light, at around 51%, while consensus expectations were at least 400 basis points higher. This number was also down 770 basis points from the … Read more

Fusion-iO May Have the Technology of the Future But Expectations Are Incredible

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Fusion-iO (FIO) just came public a few months ago, without much fanfare. The company isn’t a sexy social media darling alas LinkedIn (LNKD) or Facebook, but it does help fuel the profitability behind them. When cloud computing as a sector heated up, the stock rallied to over $40. However, after the end of its lock-up period and another secondary offering, shares have fallen back below $30. While we like the technology behind the company, we think the stock is priced for perfection. There’s a great possibility that tremendous profitability lies ahead, especially with a growth in the amount of data received and used in analytics that will continue for years, if not decades to come. Nevertheless, given the risks associated … Read more