Equity Bits

Top Research & Pitches [October 2026]

Luke Wolgram — Wed, 04 Nov 2026 16:01:09 GMT

Hello Equity Bits readers!

It has been a while since I published one of these as I largely had the newsletter paused. I am now back to writing!

Back in summer, I launched a second newsletter called Absurdly Cheap Stocks where I published an updated pitch on Moury Construct. Going forward, I’ll be moving coverage of very cheap stocks over to there, while coverage of higher quality names (usually trading at higher multiples) will remain here!

I’ll be publishing on a stable Korean food services oligopoly trading at 3.3x EV/EBIT over on Absurdly Cheap Stocks later this week! Please go check out and subscribe to Absurdly Cheap Stocks to receive it!

In October, Equity Bits published an update on Auto Partner:

Ongoing Coverage [Auto Partner $APR.WA]: The Factors Driving Higher Margins

Recapping Strong 1H26 Earnings Results
The Four Factors Driving Margins
Insider Selling - Why It’s Unlikely To Be An Investor Sell Signal

Every month, I highlight some of the top pitches, research, and reports from funds & investors I follow.

Here are the top pitches and reports for October 2026!

Let’s dive in!

Top Pitches of October 2026

New Long Research Reports

Planet Microcap Toronto 2026 - Ian Cassel presented on Golconda Gold (TSV: $GG.V - C$ 219M EV)

Last week, Planet Microcap and MicroCapClub hosted Planet Microcap Toronto 2026. Several presenters gave pitches on long ideas, all of which can be viewed on the MicroCapClub YouTube channel for free! Ian Cassel’s pitch on Golconda Gold (TSV: GG) was my favorite pitch!

Blue Orca Capital published on Three Japanese companies:

Rohm Co (TYO: 6963 - ¥1303B [US $8.0B] EV),
Chubu Electric Power Company (TYO: 9502 - ¥4713B [US $29.7B] EV)
TRE Holdings Corporation (TYO: 9247 - ¥109B [US $0.7B])

These three companies all hold equity in Toshiba at cost less returned capital. Toshiba was taken private in 2023 after years of underperformance by Japan Industrial Partners, however, it has continued to make available and publish financial statements. Earnings have since inflected significantly higher as a result of AI and datacenter related demand. Toshiba reported in FQ1 2026 (ended June 30, 2026) EBITDA of ¥136.5B, up 109% from FQ1 2025. The equity holdings in Toshiba of the above companies is estimated to be worth 80-96% of these company’s entire market cap by Blue Orca Capital.

Ongoing Coverage [Auto Partner $APR.WA]: The Factors Driving Higher Margins

Luke Wolgram — Wed, 21 Oct 2026 16:02:22 GMT

I last wrote about Auto Partner in June 2025. Since then, some key developments have propelled the share price back to all-time highs faster than I expected, including first-half 2026 results that have seen Auto Partner’s profits soar by +60% on +11% revenue growth YoY.

Auto Partner’s success this year is a result of multiple factors. The new Zgorzelec warehouse ramp-up is unlocking export opportunities. Auto Partner has been able to capture more margin on petroleum-based products as a result of higher oil prices. Deflation in auto parts in Poland appears to be reversing; returning to an inflationary environment is generally more favourable for Auto Partner. And finally, favourable exchange rates have provided a small tailwind as well. Ultimately, the same question remains for Auto Partner shareholders: are these margins sustainable?

This piece covers the following:

Recapping Strong 1H26 Earnings Results
The Four Factors Driving Margins
Insider Selling - Why It’s Unlikely To Be An Investor Sell Signal

Recapping Strong 1H26 Earnings Results

Auto Partner put out a press release back in May that showed strong preliminary results with operating profit up 56% and net profit up 58% on 9% revenue growth. They then reported actual Q1 results that matched those numbers closely. This reignited an uptrend in the stock. The company followed up with the first half 2026 report on September 17, 2026. Another strong report with operating profit climbing 54% and net profit growing an impressive 61% YoY on 11% revenue growth.

The balance sheet showed improvement too. Long-term debt declined materially, down from 168M PLN as at June 30, 2025, to 54M PLN as at June 30, 2026. Short-term debt increased from 20M PLN to 94M PLN over the last year, however, from year-end 2025, it declined from 162M. On the asset side, PP&E and inventory jumped by 69M and 184M PLN respectively over the previous year. This is almost certainly due to the Zgorzelec warehouse ramping up. As a result, cash fell, but only modestly from 75M to 66M PLN. Auto Partner runs lean on cash. They’ve been able to fund the new warehouse mostly through reinvesting profits rather than drawing down cash or taking on more debt. Overall, total assets increased 320M PLN while total liabilities jumped 80M PLN over the last year - a strong result!

The cash flow statement continues a similar story. The company is generating cash and using it to expand and pay down debt. Operating cash flow (before taxes) through the first six months of 2026 landed at 284M PLN, up from 256M PLN in the first six months of 2025. While it grew, the growth rate is perhaps not as exciting as the growth rate in profits, but a closer look reveals why: Auto Partner bought 94.6M of inventory (an increase, which reduces cash flow) in 1H26 versus selling through 14.8M of inventory (a decline, which increases cash flow) in 1H25. That’s a 109M PLN swing. Payables grew by 81M while receivables decreased by 42M, both increasing cash flow and offsetting some of the inventory. Overall, it’s pretty much as I would expect from a company opening a new warehouse to drive growth.

The Four Factors Driving Margins

Anybody can look at the financial statements and conclude Auto Partner had a good first half of the year. Understanding what’s driving those margins requires more nuance. There are four key elements driving Auto Partner’s margins. Some are sustainable tailwinds; others likely are not.

The Export Business - Doubling Down on Growth

Top Research & Pitches [May & June 2026]

Luke Wolgram — Tue, 30 Jun 2026 15:02:03 GMT

Hello Equity Bits readers!

In May, I made the decision to rebrand Capital Light to Equity Bits. The new name better reflects the kind of coverage I want to write going forward. I still love asset-/capital-light businesses, but I want room to cover names that don't fit that mold, and to write shorter, punchier pieces, with greater frequency. Equity Bits fits that better.

In May and June, Equity Bits published two updates. The first was on Riken Keiki, while the second was on Kneat.com:

Ongoing Coverage [Riken Keiki $7734]: FY2025 Update, Strong Growth, and Rapid Backlog Expansion
- 26% earnings growth and explosive 40% backlog growth at just a 12X EV/EBIT and 15X cash-adjusted P/E vs peers at 20X+
Ongoing Coverage [Kneat.com $KSI.TO]: The End Of The Road
- Kneat will be acquired for $6.50 per share, an 18% premium to the previous day’s closing price.

Capital Light is a 100% reader-supported publication. Consider sharing to help us out!

Every month, I highlight some of the top pitches, research, and reports from funds & investors I follow.

Here are the top pitches and reports for May & June 2026!

Let’s dive in!

Top Pitches of May & June 2026

New Long Research Reports

Planet Microcap and MicroCapClub held Planet MicroCap Las Vegas 2026 June 16-18. Several microcaps were pitched as longs. These pitches can be found at these links:

https://www.youtube.com/@PlanetMicroCap/videos

https://microcapclub.com/planet-microcap-las-vegas-2026-pitch-session/

New Short Research Reports

Wolfpack Research published on York Space Systems Inc (NYSE: - $3.5B) on May 11, 2026

One customer, now gone. 96% of York’s 2025 revenue came from the Pentagon’s SDA, and the Pentagon just killed the Tranche 3 Transport Layer program York’s January IPO was built on, while dissolving the SDA itself.
The replacement names SpaceX, not York. The new Space Data Network is funded at scale around SpaceX’s Starshield as sole-source backbone, with no live solicitation for a second vendor.
Former employees gut the product. Sources allege the “modular platform” pitch was false advertising, software was unfinished at launch, and satellites were “held together by Band-Aids” against accounting so opaque only two people approve costs.

Grizzly Research published on Ottobock SE & Co. KGaA (ETR: - $OBCK - €3.3B) on May 18, 2026

The controlling shareholder is drowning in debt, and minority holders inherit the overhang. Majority owner Hans Georg Näder (~81%) has extracted more cash than Ottobock earns since 2011 to fund yachts, a jet, and pet projects, draining his holding vehicle to negative equity. His Ottobock shares are pledged against a ~€1.5B PIK loan compounding near 15%, ballooning toward ~€2.36B at 2030 maturity—Grizzly pegs a margin-call trigger around €38.58 and sees forced selling or a lender takeover as the likely outcome.
Russia is a large, risky, and quietly buried profit center. Grizzly estimates ~35% of net income now comes from Russia, where revenue is growing fast even as Ottobock folded the segment into “EMEA” to obscure it. They allege the company services Russian military hospitals and supplies propaganda-featured prosthetics, exposing it to sanctions risk and “trapped cash”—while peer Össur exited entirely.
Aggressive accounting flatters the IPO-era numbers. Ottobock leans on a self-defined “Underlying Core EBITDA” (26% margin vs. 5.3% IFRS net), capitalizes development costs at ~9.6x peer levels relative to assets, and uses longer depreciation lives—practices German experts told Grizzly are impermissible.
The valuation prices in growth that a mature oligopoly won’t deliver. At ~42x trailing earnings versus Össur’s ~21x, with a 196% one-time earnings jump that didn’t carry into 2026 and only ~14% float, Grizzly calls fair value ~€30—roughly 50% downside.

Manatee Research published on Amprius Technologies Inc (NYSE: - - $1.9B) on May 20, 2026

The manufacturing partners are a “Potemkin village.” Amprius’s stock is up ~490% on supplier and customer hype, but its “Korea Battery Alliance” and US partners don’t hold up: alliance member Eurocell had its factory seized and its chairman sentenced to 10 years after a court found no real battery capability, JR Energy Solution is flagging going-concern doubt, LiBest is a tiny wearables startup, and US partner Nanotech has a multi-year trail of abandoned gigafactory announcements while still importing from China.
The biggest “third-party” supplier is really a related party. Chinese supplier Berzelius accounted for ~36% of 2025 cost of revenue, yet Manatee traces ~18% ownership back to founder/board member Kang Sun and an entity registered at Amprius’s own Fremont address—a relationship the company books as a “former affiliate” rather than disclosing as related-party.
Headline orders look exaggerated or illusory. A March 2026 “$21M China order” specs a 30Ah, 2,000-cycle cell that doesn’t exist in Amprius’s catalog (its largest is 6.5Ah), and the promo photos matched non-Chinese vehicles from Zero and Ola. Of an earlier “$20M+” LEV deal, Manatee could reconcile only ~$12.4M.
The accounting and the CEO both raise flags. Aggressive bill-and-hold revenue, climbing DSOs, ~55% dilution, and $79M+ of insider selling since November 2025—run by a CEO, Tom Stepien, whose prior company Primus Power was sued for fraudulent misrepresentation and written down to nil.

Hunterbrook published on Ensign Group (NASDAQ - - $9.3B) on June 8, 2026

The business model runs on understaffing. A five-month investigation found Ensign collects government payments calibrated for high-acuity patients, then staffs below the level those rates assume — a ~5 million-hour care gap (Jul–Nov 2024) worth roughly $161M in savings, or ~$386M annualized, exceeding the company’s $298M net income that year.
The “Ensign Effect” reverses its growth pitch. Ensign rolls up distressed nursing homes claiming to lift quality, but tracking 161 acquired facilities against ~15,000 others showed nursing hours fall after takeover — especially skilled RN hours — while acuity stays high.
Star ratings appear gamed. Sorting CMS metrics by verification tier, Ensign beats peers on self-reported, honor-system measures (~22% above average on overall quality) but lags on independently audited ones (17% worse on RN hours, 38% worse on facility-reported incidents).
Cash is tunneled to affiliates. Ensign facilities paid ~$339M to related parties it owns or controls in 2024 (~8% of revenue, more than net income) for rent, insurance, and management fees — a structure one source likened to money laundering and that a 2024 congressional letter flagged as a “deceptive tactic.”
Regulatory and legal exposure is mounting. Ensign allegedly fell below state minimum-staffing floors on 18,000+ cumulative days (2020–2025), has paid Medicare settlements topping $40M twice, and faces wrongful-death and neglect litigation cited throughout the report.
Muddy Waters also published on Ensign.

Jehoshaphat Research published on Gildan Activewear Inc (NYSE - - $9.6B) on June 16, 2026

Years of channel stuffing are finally running out of road. Jehoshaphat argues GIL has propped up revenue by pushing excess product into its distributor channel, and estimates ~$510m of “stuffed” inventory sitting in the channel as of Q126. Strip it out and they peg “true” organic growth at roughly -3% annually over the past three years — versus the Street’s modeled +5% for 2027-28.
Factoring hides the smoking gun in the receivables. GIL sells ~45% of its receivables off-balance-sheet, masking a DSO that, once “unfactored,” sits near 129 days company-wide and ~195 days at top distributor S&S (up from 79 in 2023). Every prior sustained DSO run-up — 2008, 2014, 2019 — preceded a guidance cut and a 30%+ stock crash; the current build is the longest and highest on record.
Field work points to quarter-end games and a “Locker Program.” Seven interviews with former employees, distributors, and customers describe GIL “compelling” customers to pull forward orders with 90-120 day terms, plus a consignment-like arrangement where product ships and is potentially booked as a sale before the customer ever pays — a setup Jehoshaphat likens to past SEC channel-stuffing cases (Under Armour, Elanco, Sunbeam).
The unwind looks like it’s starting, into a balance sheet with no slack. Q126 DSO fell sequentially (unusual seasonally), GIL is now citing “proactive” customer destocking, and the firm sees a ~$0.8bn 2H26 revenue gap (~20% miss potential). Meanwhile, leverage is 3.3x post-Hanes and 2026 FCF guidance of $850m requires nearly doubling cash flow — against governance flags including CEO tax disputes and three senior Ethics & Fraud Committee departures.

Ongoing Coverage [Kneat.com $KSI.TO]: The End Of The Road

Luke Wolgram — Mon, 08 Jun 2026 20:15:27 GMT

Hello Equity Bits readers!

Today marks the end of the road for Kneat.com as a publicly traded company. Kneat announced Monday, June 8, 2026, that the company had entered into a definitive arrangement agreement with Private Equity firm Thoma Bravo in an all-cash transaction, valuing the business at around $650M CAD, or $6.50 per share.

The transaction price is an 18% premium to Friday’s closing price of 5.42. While that’s well above where the stock has traded over the last 6 months, it’s also below the stock’s all-time highs set back in February 2025 at $7.25.

Equity Bits (known as Capital Light at the time) originally initiated coverage (Part 1 and Part 2) on Kneat in January 2025 with the stock at $6.39. This brings the return on the investment to effectively 0%, with a drawdown in the meantime.

Overall, it is a little disappointing that the company has decided to sell now. If given another year or two, I believe shareholders likely could have received north of $8 per share. It’s not a terrible outcome, but it does remove another high-quality microcap from the publicly traded universe.

Reflecting on the investment has some good and bad. The good was that I was generally correct in my assessment of the business. The bad is that Equity Bits slightly overestimated ARR growth, resulting in me overpaying slightly. Beyond this, I’m not sure there is much more to reflect on.

During the 20 or so months that I held Kneat, it got caught up in the SaaSpocalypse that hit all software stocks at the same time. This has been the pervasive narrative that software companies are being disrupted by AI, with the theory being that AI-generated code (“vibe-coding”) would make software massively easier to develop and therefore lower barriers to entry and increase competition. Kneat was, in my opinion, more immune to this than other software names, due to the complexities of deployment, which would often take months. Ripping out Kneat to replace it with an internally vibe-coded alternative simply didn’t make sense for Life Sciences customers. Nonetheless, it didn’t matter, and the stock still sold off.

The SaaSpocalypse is likely what prompted management to explore strategic alternatives. The company had reached a scale of $76M of ARR. This likely made it more palatable to potential acquirors than it was at much lower levels of ARR.

I sold all shares at $6.42 this morning. With just $0.08 of upside, or about 1%, there is simply no reason for me to hold this further. While I do think there is a small chance of a higher bid coming in, it seems unlikely at this time given the thorough process the company went through.

I have a few ideas I’ll be publishing very soon to redeploy some of the cash. Stay tuned!

Thumbnail Image: Aperture Vintage

Disclosure: I sold all Kneat.com shares at $6.42.

Ongoing Coverage [Riken Keiki $7734]: FY2025 Update, Strong Growth, and Rapid Backlog Expansion

Luke Wolgram — Fri, 29 May 2026 16:45:29 GMT

Hello Capital Light/Equity Bits readers!

Capital Light is becoming Equity Bits. This is a change I've wanted to make for a while. The new name better reflects the kind of coverage I want to write going forward. I still love asset-/capital-light businesses, but I want room to cover names that don't fit that mold, and to write shorter, punchier pieces, with greater frequency. Equity Bits fits that better.

It’s only been a month since Equity Bits (Capital Light at the time) pitched Riken Keiki (TSE: 7734), but the company has already reported strong earnings, resulting in the stock climbing to around ¥3700 per share, up a modest 5% from the original pitch price of ¥3500.

Equity Bits continues to believe there is near-term upside to ¥5000 per share as strong earnings results materialize into multiple expansion to a 16 EV/EBIT multiple.

Thesis Recap

Equity Bits pitched Riken Keiki on April 17, 2026 at ¥3500 per share. For those who need a refresher, here’s a quick recap:

Riken Keiki is a Japanese company that develops and sells gas detectors. This includes fixed detectors and integrated systems, as well as portable detectors. The company also provides ongoing maintenance and services revenue.
Riken Keiki’s revenue is split between Japan (53% of sales), China/Rest of Asia (24% of sales), North America (18% of sales), Europe (4% of sales), and Others (1% of sales).
Revenue mix by customer industry includes electrical and semiconductor (42% of sales), Gas & Petrochemical (23% of sales), Shipping (6%), and Others.
Generally, Riken Keiki sells equipment that lasts 10+ years. However, gas detection sensors housed within the equipment require replacement more frequently (sensors generally require replacement every 1-5 years, depending on the sensor), resulting in a razor-and-blades-like business model. Furthermore, jurisdictions like Japan require frequent inspection intervals mandated by law.
Equity Bits believes Riken Keiki is a high-quality business due to the recurring revenue components of sensor replacement and maintenance revenue.
Equity Bits thinks the market continues to underappreciate Riken Keiki. As a result, Equity Bits estimates +35% near term upside to ¥5000 per share as a base case, and as much as +90% upside to ¥7000 per share in a bull case.

FY25 Earnings Recap

Riken Keiki released FY25 earnings and a new medium-term management plan on May 13, 2026.

The highlights were as follows for the FY25 year (ended March 31, 2026):

Revenue ¥55.2B (+12.6% YoY)
Operating Profit ¥12.4B (+16.8% YoY)
Net Profit ¥9.96B (+24.4% YoY)
EPS ¥217 (+26.3% YoY)
Backlog ¥18.4B (+40% YoY)
Portable Device Orders +58%
Overseas Mix 47.3%
New ~¥5B buyback

These numbers landed well above management’s previously stated guidance of revenue of ¥52B (+6%) and ¥12B of operating profit. Overall, these are strong results, and the growing backlog continues to imply strong demand, particularly in semiconductors and data centers.

(Note: FY26 was labelled as FY27 in the original pitch. FY25 was April 1, 2025-March 31, 2026, while FY26 will be April 1 2026-March 31, 2027, hence we have now entered FY26.)

Medium-Term Plan & Targets

Management’s new medium-term plan, released alongside FY25 earnings, presented FY28 targets of ¥70B of sales and ¥14B of operating profit by FY28. The plan calls for a potential deliberate margin trough in FY27 or FY28 (though absolute operating profit is still expected to grow) from human capital and ERP investments. The margin plan likely reflects a mix of typical Japanese conservatism and genuine investment spend, but reiterates mid to high single-digit growth rates in revenue, with operating leverage starting to kick in near the end of the plan.

A Business Model Correction

In the original pitch, it was suggested that equipment lasts for about 10 years, while sensors housed within require replacing every 6-18 months. Upon further investigation, it appears the sensor replacement lifecycle is actually between 1 and 5 years. There is, however, a 6-month calibration interval mandated by Japanese law, that requires inspection and maintenance of gas detectors every 6 months. This is still a recurring maintenance revenue event, but not quite what was originally described.

Update on Valuation

Equity Bits believes the stock price remains attractive, trading at multiples in the range of 60-70% of its Western peers, despite a dominant market position and leading market share. At an EV/EBIT of 11.7, Equity Bits believes there remains upside to a mid- to high-teens multiple, with long-term multibagger potential.

Updating cases for FY26 now that FY25 numbers have been released improves the base case slightly, raising the base case stock price from ¥4900 to ¥5000. The bear case improves from ¥3100 to ¥3400, and the bull case improves from ¥6900 to ¥7000.

The base case shown here is based on management’s numbers stated in the MTP and a 16 EV/EBIT multiple, while the bear and bull cases use EV/EBIT multiples of 12 and 20, respectively.

At the bottom, readers can find an Excel valuation model (created by Claude) with the above metrics, as well as a DCF and sensitivity analysis.

Updated scatter plots continue to tell the same story. Western peers trade at a median TTM EV/EBIT of around 18 (dotted line) vs Riken Keiki at under 12. The forward-looking picture tightens the dislocation narrative even further, placing Riken Keiki at the highest 2-yr forward growth rate (analyst estimates) of 10%, while at the same time, trading far below the 1-yr forward EV/EBIT of peers.

Conclusion

Overall, FY25 was a strong year, and 25FQ4 was a strong quarter. Management’s new medium-term plan provides new insight into what we can expect from the company over the next few years, including reiterating mid- to high-single-digit revenue growth rates, and is helpful in setting margin expectations.

Equity Bits continues to believe that Riken Keiki remains materially undervalued.

Files:

Riken Keiki Valuation Model Fy25

27.6KB ∙ XLSX file

Download

Investor Presentation May 2026, Fy2025

1MB ∙ PDF file

Download

Consolidated Financial Results Fy2025

467KB ∙ PDF file

Download

Riken Keiki Medium Term Management Plan Fy26 28

2.06MB ∙ PDF file

Download

Sources:

Riken Keiki Investor Relations (see PDF files above)
Fiscal.ai
Claude

Thumbnail Image: Riken Keiki Product List

Disclosure: Accounts I manage are long Riken Keiki (7734)

Top Research & Pitches [April 2026]

Luke Wolgram — Thu, 30 Apr 2026 14:02:24 GMT

Hello Capital Light readers!

In April, Capital Light published a brand new Actionable Idea on Riken Keiki (TSE: 7734), a company that Capital Light believes has 30% immediate upside and as much as 100% upside over the next 2 years.

Every month, I highlight some of the top pitches, research, and reports from funds & investors I follow.

Here are the top pitches and reports for April 2026!

Let’s dive in!

Top Pitches of April 2026

New Long Research Reports

Alta Fox Capital published on Premium Brands Holdings Corp. (TSE: PBH - $4.4B CAD) on April 29, 2026

Alta Fox Capital presents a long thesis on Premium Brands Holdings (PBH CN), a Canadian specialty food manufacturer trading at $83 CAD with a base case target of $146 CAD (76% upside). The stock has de-rated to decade-low multiples due to temporary headwinds — a slower-than-expected ramp of over $1B in growth capex, beef price inflation hurting margins, and investor skepticism around FCFE conversion. Alta Fox argues these pressures are transitory, with the capex cycle already winding down, organic revenue accelerating to 17% growth in 2H FY25, and FCFE already inflecting positively.
The firm’s core variant view is that PBH’s FY27 earnings power is significantly underappreciated, modeling pro forma EBITDA of ~$1.15B versus consensus below $1B, with EPS roughly doubling from FY25 to FY27. Alta Fox urges management to provide a clear FY27 EBITDA and FCFE target at the upcoming Q1 earnings release to close the gap between price and intrinsic value. Key risks include high leverage (~3.8x), continued beef inflation, and potential capex overruns, though Alta Fox views downside as limited relative to the significant upside from a re-rating toward historical multiples.

New Short Research Reports

Wolfpack Research published on POET Technologies Inc (NASDAQ: - $1.8B) on April 10, 2026

Wolfpack Research issued a short report on POET Technologies Inc. alleging that the company is a classic stock promote that has pivoted through seven different business models over the last decade while failing to generate meaningful revenue. The report claims POET’s primary business model is selling stock through heavy dilution, raising roughly $538 million since 2020 while reporting only $2.3 million in total revenue. The company has also allegedly utilized paid stock promotion to generate retail interest.
The report further argues that POET qualifies as a Passive Foreign Investment Company (PFIC) under U.S. tax law due to its high levels of passive assets (cash) and passive income (interest). Wolfpack warns that U.S. shareholders face significant tax compliance burdens and potentially punitive tax treatment on gains if they fail to make specific, timely tax elections.

Morpheus Research published on Figure Technology Solutions Inc (NASDAQ: - $7.4B) on April 16, 2026

morpheus-research.com/figure/ $FIGR","username":"MorpheusRes","name":"Morpheus Research","profile_image_url":"https://pbs.substack.com/profile_images/1895191526805798912/QL0Z1NXM_normal.png","date":"2026-04-16T17:43:25.000Z","photos":[],"quoted_tweet":{},"reply_count":13,"retweet_count":9,"like_count":53,"impression_count":15472,"expanded_url":{"url":"http://morpheus-research.com/figure/","title":"Figure Technology: Smoke And Mirrors From A Fast-And-Loose Lender Masquerading As A Blockchain Darling","description":"Summary * Figure Technology Solutions, Inc. (NASDAQ: FIGR) is a $7.7 billion fintech company that claims to use blockchain to improve the speed, security, and cost of originating and securitizing home equity lines of credit (“HELOCs”). Beyond this initial market, Figure has developed a suite of blockchain tech that, according","domain":"morpheus-research.com","image":"https://pbs.substack.com/news_img/2044834070278877184/Ufu3ypqH?format=png&name=orig"},"video_url":null,"video_preview_media_key":null,"belowTheFold":true}" data-component-name="Twitter2ToDOM">

The report alleges that FIGR is basically a conventional HELOC lender dressed up as a blockchain story. It argues that the company’s blockchain claims are overstated, its growth depends on aggressive underwriting, and several of its blockchain projects have little real traction.
It also raises concerns about credit quality, governance, and insider behavior. The authors conclude that FIGR deserves to be valued more like a risky lender than a crypto-style disruptor.

Callisto Research published on Sportradar Group AG (NASDAQ: - $3.6B) on April 22, 2026

Callisto Research’s April 22, 2026 report highlights concerns about Sportradar Group AG, a Swiss sports data and betting services provider to leagues like the NBA, NHL, and FIFA. It claims SRAD supplies over 270 illegal gambling platforms (about one third of its eight hundred customers), many of which are unlicensed or using fake regulators.
CEO Carsten Koerl has undisclosed ties to illegal operations like Betgames and Liga Stavok (sanctioned links) and serves post-2022 Russia/Iran/Crimea platforms. Weak controls (5-year material weakness, CFO churn) amplify license risks in Europe/North America (25% revenue). US regulators are reviewing.

Grizzly Research published on Partners Group Holding AG (SWX: PGHN - $22B CHF) on April 22, 2026

Grizzly Research published a short-seller report alleging that Partners Group Holding AG (PGHN) has been significantly inflating valuations in its flagship evergreen funds, particularly its $15.9 billion Master Fund. After reviewing underlying company filings and consulting industry experts, Grizzly estimates that close to 40% of holdings in regions where data is available appear severely mismarked. One expert compared the situation to the Wirecard fraud.
Specific examples of mismarked holdings mentioned include a Swedish data center marked up 177% while revenue fell 18%, a Russian pharmaceutical asset marked up during the same period Putin’s government seized it, and a holding marked up 383% just 26 days after acquisition.
The report also flags irregularities in the direct-debt portfolio, where principal balances moved in ways inconsistent with standard accounting. It challenges Partners Group’s claim of below-average software credit exposure, estimating the true figure at 32%, above the industry average. With redemptions from the Master Fund doubling year-over-year, Grizzly concludes that Partners Group’s valuation opacity poses a serious threat to its fundraising ability and long-term financial health.

Initiating Coverage [ACTIONABLE IDEA #5]: Riken Keiki

Luke Wolgram — Fri, 17 Apr 2026 14:03:02 GMT

Hello Capital Light readers!

Capital Light has discovered a potential opportunity in a high-quality Japanese stock trading at an attractive valuation for its quality, recurring revenue nature, and growth prospects.

Conviction Level: Medium

Risk Level: Low-Medium

This idea has the following characteristics:

Moderate liquidity (100k shares/day, ¥385M ($2M USD)/day) making this idea suitable for small-medium funds and most individual investors.
A fortress balance sheet with about 17% of the market cap in cash and liquid securities.
A cash-adjusted P/E under 15 and an EV/EBIT of 11.
This company remains an undiscovered AI beneficiary selling to semiconductor companies and datacenters (40% of revenue), which remains diversified through other sector exposures (combined 60% of revenue) as well.
Percentage revenue growth in mid single digits to mid teens.
Capital Light believes there is earnings upside and multiple upside from ¥3500 per share today to ¥4,700 per share (+32%) based on a 16X EV/EBIT fair value multiple immediately, and as much as ¥4900 (+40%) per share in a 2027 base case. A bull case puts shares as high as ¥6900 (+97%) in a 2027 bull case.

Let’s dive in!

Introduction

Riken Keiki (Tokyo Stock Exchange: 7734) is a Japanese company that manufactures and sells critical industrial gas detection and alarm equipment. At first glance, Riken Keiki initially appears to be a basic commoditized hardware manufacturer. In reality, Riken Keiki is a specialized hardware sales business with attached replacement, maintenance, and service revenue, resulting in a high-quality recurring revenue model. Riken Keiki is effectively a razor-and-blades business model company valued like an industrial commodity company.

Capital Light believes there is immediate 33% upside to a fair value of ¥4,750 per share and up to 100% upside to ¥6900 per share if a medium-term bull case materializes.

Business History

Riken Keiki’s origins hail from the Institute of Physical and Chemical Research (known as RIKEN) headquartered in Wakō, Japan, in the 1930s. On March 15, 1939, the company was founded as Riken Keiki Co., Ltd, for the purpose of commercializing and mass-producing an optical interference gas detector that had been developed at the Institute. The company completed a factory in 1940 and an office in 1941 near the coal-rich Hokkaido region. Riken Keiki’s sensors were used to help detect gas in coal mines before serious explosions occurred, which were, unfortunately, common at the time.

During WWII, the company’s factories were commandeered by the Japanese as munitions production facilities. Post-war, the allied occupation restored Riken Keiki’s factories to producing gas detection equipment in order to promote further coal production to help Japan’s industrial era get back on track.

Over the following decades, Riken Keiki continued to develop gas detection and sensor technology. This included world-first innovations such as portable and belt-worn detectors. The company expanded beyond coal mines and entered oil & gas, automotive, food and beverage, and eventually semiconductors. The company expanded globally, opening new offices in North America, Europe, and Asia.

Over the decades, Riken Keiki developed more complex systems. Alongside individual hardware and sensor innovation, the company developed integrated systems incorporating controllers, multichannel alarm panels, and sampling systems, enabling centralized monitoring of dozens or hundreds of detectors in large plants. These larger systems increased switching costs for customers and created higher value‑added revenue, such as maintenance and repair services.

Business Model Today

Today, Riken Keiki continues to research, develop, manufacture, and sell industrial gas detection and alarm equipment, sensors, and systems. In addition, recurring maintenance services are also provided to customers. Riken Keiki’s main products include:

Stationary (fixed) gas detectors and alarm systems: combustible gas detection alarm systems, gas detector heads with signal converters, smart gas detector heads, single‑ and multi‑point indicator/alarm units, multipoint gas monitoring systems, fixed CO₂ monitors and gas analyzers.
Portable and personal gas detectors: multi‑gas detectors (e.g., GX‑9000, GX‑Force), single‑gas personal monitors, portable toxic gas monitors, gas leak checkers and six‑component gas detectors, often with Bluetooth connectivity, long battery life and rugged IP66/68 or explosion‑proof ratings.
Gas analysis and environmental measurement equipment: auto‑emission analyzers, surface analyzers (photoelectron spectrometers), optical gas indicators, calorimeters and environmental measurement devices used in laboratories, utilities and industrial process control.
Services and solutions: design and customization of gas sampling systems, installation, calibration, preventive maintenance, periodic inspections, sensor replacements and system upgrades, often delivered via long‑term service contracts and local affiliates.

It is notable that a key part of the business model revolves around replacing internal sensors more often than the equipment that houses them, resulting in hardware sales followed by recurring sensor sales. While equipment and hardware may last 5-10 years, internal sensors often require replacing every 6-18 months. This locks in customers to re-order sensors on a consistent basis and further incurs maintenance revenue, making this portion of revenue sticky and effectively recurring. Capital Light believes this is not appreciated by the current valuation.

Key Segments and Revenue Split

Riken Keiki discloses its revenue mix by device type, customer industry, and geography. The company also discloses mix by product and maintenance revenue.

Device type is split into three categories:

Fixed-Type: 63.6% of sales.
Portable-Type: 33.7% of sales.
Other measurement devices: 2.7% of sales.

Revenue by geography is split:

Japan: 44.1% of sales.
Asia (ex-Japan): 22.9% of sales.
North America: 16.7% of sales.
Europe: 3.9% of sales.
Other: 0.6% of sales.

Note: Riken Keiki’s investor presentation doesn’t disclose Japan revenue % mix directly. Number was calculated by taking all other regions and subtracting from 100%.

Revenue by customer industry is split:

Electrical and semiconductor: 41.1%
Petrochemical: 10.4%
Gas: 13.3%
Shipping: 6.1%
Other: 29.1%

Revenue by Product/Maintenance is split:

Products: 57.7%
Maintenance: 42.3%

Industry & Competition

The gas and alarm detection industry is moderately concentrated and characterized by several large global players alongside specialized regional firms. Prominent participants include Honeywell International, Drägerwerk, MSA Safety, Industrial Scientific, Siemens, Emerson, General Electric, Johnson Controls, New Cosmos Electric, Crowcon and others. Many of these companies offer broader safety, automation or instrumentation portfolios, with gas detection being one of multiple product lines. In contrast, Riken Keiki is more narrowly focused on gas detection and environmental measurement.

Market participants compete on sensor performance, reliability, compliance certifications, integration with control systems, total cost of ownership, and after‑sales service rather than on headline pricing alone, given the equipment’s mission‑critical nature.

Riken Keiki stands out in the industry due to being a reputable Japanese manufacturer, a long history of reliability, vertical integration including using the company’s own in-house designs (unlike some competitors), and specialization in high-value fixed systems as well as multi-gas portable instruments. Riken Keiki’s vertical integration allows it to control critical aspects of its supply chain that competitors may have less control over.

Key demand drivers applicable to Riken Keiki are clear. The first is the semiconductor industry CAPEX cycle. Historically, this has been a highly cyclical sector with boom and bust dynamics. AI narratives, however, appear to have stabilized the ‘boom’ cycle in the industry for now. Second is the petrochemical, oil, and gas sector, which remains highly cyclical and subject to geopolitical turmoil.

Other demand drivers include safety and environmental regulations (as regulations become more stringent, demand for monitoring increases), energy infrastructure growth, and technological advances enabling more robust feature sets, including IoT-enabled sensors, wireless connectivity, remote monitoring, and analytics capabilities.

Competitive Advantages

Riken Keiki’s competitive advantages include the following:

Research & Development, Technological depth, and in‑house sensors: Riken Keiki researches, develops, designs and manufactures its own sensors. Technology used includes electrochemical, catalytic, IR, optical interference, and optosonic. When done well, Riken Keiki can stay ahead of the competition that may not have the ability, resources, engineers, or budget to innovate.

Systems integration and high value‑added solutions: Beyond standalone detectors, Riken Keiki provides whole integrated systems and centralized monitoring. This embeds the company’s hardware in customer’s systems and makes Riken Keiki critically tied into customers’ operations.

Installed base and switching costs: Gas detection systems are safety‑critical, closely tied to plant layouts and often tied to regulatory approvals and customer procedures; replacing them involves engineering work, downtime and re‑certification, creating high switching costs once Riken Keiki’s equipment is installed.

Global approvals and vendor listings: Being placed on approved vendor lists of major corporations and holding certifications for international safety standards (e.g., for Aramco projects, marine approvals) forms an additional barrier for competitors trying to displace Riken Keiki in large accounts.

Global Scale: Riken Keiki benefits from being the largest specialized gas sensor company on the planet. Although global competitors include larger conglomerates like Honeywell and Siemens, these companies are more diversified and do not specialize in sensors. Riken Keiki’s niche focus on the sensor equipment market results in 100% of attention and resources being dedicated to that market, rather than having resources split amongst multiple business groups. Capital Light believes niche-dominant industry players have a natural advantage over more broadly diversified conglomerates.

Competitive Disadvantages and Risks

Larger Competitors: Despite Riken Keiki’s narrow and specialized focus, they still compete against larger firms with more absolute dollars. Should these larger competitors decide to act irrationally, they could potentially threaten Riken Keiki with a willingness to run unprofitably in the gas detection sensor market for an extended period of time.

Geographic concentration: Japan alone accounts for around 45% of revenue, exposing the company to domestic industrial and regulatory dynamics.

Geopolitical concerns: Although not disclosed precisely, China likely makes up a good portion of Riken Keiki’s Asia revenue (23% of total). Intensifying geopolitical tensions between western-allied Japan, western-allied Taiwan and China could result in sanctions and regulations that make it difficult to or prevent Riken Keiki from selling to the Chinese market.

Cyclical exposure: Significant exposure to the semiconductor, petrochemical, and gas industries results in potential headwinds from global economic cycles.

Financials & Valuation

Quick Valuation Metrics

As of the time of writing this piece, Riken Keiki’s stock price trades at ¥3540. It had traded as low as ¥2920 while working on this article. While I believe there is still strong value even at ~¥3500 per share, it was more attractive when it briefly sold off below ¥3000. Nonetheless, there is adequate upside to continue publishing this piece.

At ¥3500 per share, Riken Keiki has a market cap of ¥156B ($980M USD). The company holds around 16% of its market cap (¥25B) in cash and short-term investments, with little debt, bringing the enterprise value to ¥133B ($840M USD). Management has guided for ¥12B of EBIT in FY26 (FY26 ends on March 31, 2026). This gives the company a FY26 EV/EBIT multiple of 11. The company has earned ¥184 of EPS in the last twelve months, placing the trailing P/E at 19. Adjusting for the ¥550 per share in cash, the cash-adjusted P/E sits at 16.

Capital Light believes finding businesses of this quality for these multiples is extremely rare.

Profitability Analysis

Riken Keiki’s revenue and profitability trajectory has been generally strong. Revenue has doubled since 2017 (9.7% CAGR), while gross profit and operating income have grown at 11% and 13% CAGRs respectively, maintaining a relatively steady upward trend. For FY26, management guided for ¥52B of revenue (+6% YoY) and ¥12B of operating income (+13% YoY), demonstrating clear operating leverage over FY25.

There is good reason to believe that Riken Keiki can maintain revenue growth in the mid single digits going forward in a base case scenario, with a path to double-digit revenue growth in a bull case. Global semiconductor equipment capex spending is expected to climb from $133B in 2025 to $156B in 2027 (8% CAGR). The oil & gas sector is more susceptible to the whims of the global economy, but even if infrastructure build-outs slow to a halt, Riken Keiki is likely to experience some growth from increased regulation and monitoring requirements. In the event of a burst of the semiconductor supercycle, Riken Keiki could experience a decline in revenue if not offset by other sectors.

Putting it all together, Capital Light believes a reasonable base case is 5–8% annual revenue growth with high single-digit to mid‑teens profit growth. A bear case would suggest downside to low single digit revenue declines in a macro/semi down‑leg. A bull case would have a path to 8–12% top‑line growth for a few years if AI‑driven fab capex and international expansion both hit at once. Modelling this out looks something like the following:

Riken Keiki’s conservative balance sheet has the capital to make the investments necessary to increase production inline with demand. The company spends about 6% of revenue on R&D, which is on the higher side for an industrial equipment company, suggesting that further innovation could drive upgrade cycles, coinciding with price increases and maintaining growth.

Capital intensity is low. Riken Keiki runs a structurally asset‑light model with modest capex needs resulting in solid free cash flow generation. Capex has ranged from just 2% to 12% of revenue in the past ten years. Revenue growth has followed CAPEX ramps in the following years.

Peer Comparison

Relative to peers, Riken Keiki trades at modest multiples across the board. I had Claude generate scatterplots of trailing and forward valuation metrics vs. revenue growth, ROIC, and ROE. These scatterplots consistently illustrate Riken Keiki’s discount for its quality and growth rate relative to all major publicly traded peers. I’ve included a gallery with all the scatterplots at the bottom of this piece. I’ll highlight a couple in particular here. It is worth noting that most trailing and forward metrics are interchangeable, given the relatively mature nature of the industry.

The first chart shows Riken Keiki’s growth rate (TTM) of about 6%, putting it on par with American peers Teledyne and Honeywell. Despite this, Riken Keiki’s EV/EBIT multiple at about 11X is approximately half of Teledyne and Honeywell in the mid-20s. Slower-growth peers like Siemens and Emerson also find themselves at higher valuations.

The second chart was selected because it plots Riken Keiki’s ROIC relative to peers, illustrating the clear ‘cheap for the quality’ factor.

Quite frankly, all the Japanese companies are in a similar boat here, trading at considerable discounts to American and European peers, despite having superior growth and return metrics. This is a consistent theme across all the charts. Riken Keiki is perhaps the second most interesting. Direct competitor New Cosmos is actually more interesting, but is also much smaller. I have begun research on New Cosmos and will update readers in the future.

Conclusion

Capital Light rates Riken Keiki as a medium-conviction, low-to-medium-risk opportunity. This is a business with competitive advantages, durable recurring revenues, and a strong balance sheet. Investors are unlikely to lose a lot, and have the potential to make considerable gains if correct.

Valuation Scatterplots:

Sources:

Riken Keiki Investor Relations

Fiscal.ai

Claude

Thumbnail Image: Riken Keiki Product List

Disclosure: Accounts I manage are long Riken Keiki (7734)

Top Research & Pitches [March 2026]

Luke Wolgram — Tue, 31 Mar 2026 17:59:14 GMT

Hello Capital Light readers!

In March, Capital Light made the decision to pause paid subscriptions and make all content available for free!

In April, Capital Light will be publishing on Riken Keiki (TSE: 7734), a company that Capital Light believes has 40% immediate upside.

Every month, I highlight some of the top pitches, research, and reports from funds & investors I follow.

Here are the top pitches and reports for March 2026!

Let’s dive in!

Top Pitches of March 2026

New Long Research Reports

Alta Fox Capital published on Xpel Inc. (NASDAQ: XPEL - $1.2B) on March 31, 2026

Alta Fox Capital presents XPEL as a dominant player gaining share in the underpenetrated, growing paint protection film (PPF) market, with a strong brand, software advantages, and improving demand trends supported by dealer surveys and Google Trends data.
The company is emerging from a multi-year investment cycle, enabling operating leverage; CEO Ryan Pape targets EBIT margins doubling from 13% in FY25 to 26% by FY28 via vertical integration, projecting EPS roughly doubling under conservative assumptions for ~110% stock upside from $40.
XPEL trades at attractive valuations (18x NTM PE vs. historical 30x), with limited competitive risks, strong execution track record, and M&A appeal to larger coatings firms, creating asymmetric risk-reward.

New Short Research Reports

GlassHouse Research published on Exchange Income Corporation (TSX: EIF - $8B CAD) on March 9, 2026

GlassHouse Research highlights EIF being marketed as a defensive Canadian income compounder generating stable cash flow across cycles, but alleges that a material portion of earnings is derived from Regional One (R1), an international aircraft leasing and asset-recycling platform operating outside Canada, where counterparty risk, asset recoverability, and valuation assumptions are structurally higher than investors associate with a domestic dividend vehicle.
The report reveals criticisms, including Regional One’s high-risk international aircraft leasing to counterparties in countries like Nigeria and Venezuela, with many customers bankrupt and 30-50 planes idle in Arizona storage since COVID.
It accuses accounting practices of inflating margins through depreciation below EBITDA, inventory reclassifications, and expected-selling-price-based cost relief, unlike peers.
The report claims conventional free cash flow is negative in recent years, with dividends funded by external financing like debt and equity, estimating ROIC at 7% below the cost of capital.

Muddy Waters Research published on SoFi Technologies Inc (NASDAQ: SOFI - $20B) on March 17, 2026

Muddy Waters’ report brands SOFI a “financial engineering treadmill” that manipulates charge-offs, FV models, and off-balance-sheet structures to inflate earnings for management bonuses while serially diluting shareholders.
Muddy Waters claims the personal loan charge-off rate is truly 6.1% (vs. reported 2.89%) via pre-120-day sales and VIE parking, generating $259M in fake FV gains. This accounts for 25% of 2025 Adjusted EBITDA.
Seller-financed sales at ~5% to buyers of SOFI’s own loans fake 106% UPB executions and 6% Servicing Assets (vs. peers ~1%), hiding $312M+ unreported debt that fails ASC 860 sale accounting.
Student loans, LPB wet-funding, and $194M capitalized marketing slash Adjusted EBITDA ~90% to $103M
CEO Anthony Noto extracts $58M via prepaid forwards amid 13.7% dilution.

Wolfpack Research published on Babcock & Wilcox Enterprises Inc (NYSE: BW- $1.9B) on March 12, 2026

Wolfpack Research has published a short-selling report on Babcock & Wilcox Enterprises (BW), a power equipment company whose stock surged 75% after announcing a major $2.4 billion deal for natural gas-fired boilers to power AI data centers. The report argues this deal is overhyped and flawed, urging caution for investors.
BW announced a $2.4B contract to build four 300-megawatt power plants for “Base Electron,” which it called an Applied Digital (APLD) subsidiary, but APLD publicly contradicts this, describing Base Electron as an independent entity it only partly owns (10% equity stake). Base Electron shares an address with BW’s top shareholder B. Riley Financial (RILY, 24.7% owner) and lists RILY’s CEO Bryant Riley as a director, raising undisclosed conflict-of-interest concerns.
Excluding this deal, BW’s bookings dropped 27% and backlog fell 14% year-over-year in 2025, with revenue forecasts plunging (e.g., 78% cliff from 2026 to 2027); the report calls Wall Street’s projected 22% revenue growth through 2027 unrealistic, tied to over-reliance on one fading Indiana project.

Top Fund Letters of March 2026

There were no new fund letters in March 2026 that I felt were worth highlighting.

Disclosure: The author is long Xpel Inc. The author may initiate or close a long or short position in any security at any time, with no obligation to inform or update readers.

Thumbnail Image: Sebastian Staines

Top Research & Pitches [February 2026]

Luke Wolgram — Fri, 27 Feb 2026 16:00:27 GMT

Hello Capital Light readers!

In February 2026, Capital Light published two pieces:

Ongoing coverage on Xpel Inc (A DCF Model).
Ongoing coverage on Haypp Group (Q425 and FY25 Earnings Recap - A Return to Active Consumer Growth Trends.

Every month, I highlight some of the top pitches, research, and reports from funds I follow.

Here are the top pitches and reports for February 2026!

Let’s dive in!

Top Pitches of February 2026

New Long Research Reports

There were no new long research reports in February 2026 that I felt were worth highlighting.

New Short Research Reports

Snowcap Research published on Sterling Infrastructure (NASDAQ: STRL - $14B)

Snowcap argues Sterling Infrastructure (STRL) is essentially a regional site-prep/excavation contractor being valued like an AI/data-center picks-and-shovels play, with data-center exposure overstated. It cites subsidiary project evidence suggesting only 18 data center projects since 2020 (vs. “100 or so” implied) and ENR-derived mix data implying ~40% of key E‑Infrastructure subsidiary revenue is from lower-margin “general buildings”/warehouses.
It also claims backlog-driven growth and profitability are lower quality than advertised, including a heavy reliance on subjective “contract estimate” revisions and cash flow boosted by advance billings. The report suggests 60–80% downside, and shows illustrative values around ~$178 (≈58% downside) under consensus margins and ~$88 (≈79% downside) under normalized margins vs. today’s stock price of $434.

Gotham City Research published a follow-up on Carvana Co (NYSE: CVNA - $47.8B)

Gotham’s Carvana follow-up claims new VIN-by-VIN evidence that Bridgecrest (a DriveTime-related entity) becomes the ultimate/most recent lienholder on cars Carvana sold, even if Carvana appears earlier as the lienholder. They argue this implies Carvana’s loan-sale economics (including “Gain on Loan Sales”) are more tied to DriveTime/Bridgecrest than disclosed. The report demands that management explain how the loans get there and how much is involved.
They cite 34 additional matched VINs plus a re-check of the original 34 (using detailed vehicle-history timelines rather than summary screens), and they point to Carvana responses to BBB complaints that refer to Bridgecrest as the lienholder/loan provider as supporting corroboration.

Wolfpack Research published on IonQ Inc (NYSE: IONQ - $12.3B)

The report alleges IonQ lost funding for key Pentagon-related contracts that had made up a large share of 2022–2024 revenue, leaving an estimated ~$54.6M gap tied to unfunded portions (options/ceilings) of federal awards. It claims this “validation” was driven by opaque, congressionally directed earmarks rather than standard DoD demand, and that major funding remained absent in the FY2026 budget while only a smaller Qubitekk-related item appears renewed.
It further argues IonQ tried to mask the shortfall via dilution and acquisitions of non-quantum/adjacent businesses (e.g., ID Quantique, Capella, Vector Atomics, proposed SkyWater), alongside changes in disclosure such as dropping bookings. The report also flags clustered insider selling/10b5-1 activity around FY2025 funding decisions and questions whether certain commercial deals (e.g., EPB Chattanooga) were partly self-financed or earmark-supported.

Top Fund Letters of February 2026

Alluvial Capital

Alluvial Capital, one of my favourite small-cap funds, published its Q4/FY 2025 annual letter, highlighting successful investments in a banner year for the fund, as well as some new ideas for 2026.

Sohra Peak Capital Partners

Sohra Peak Capital, another one of my favourite small/mixed cap funds, published its Q4/FY 2025 annual letter.

Disclosure: The author has no positions in securities mentioned directly as of the time of publishing. The author may initiate a long or short position in any security at any time, with no obligation to inform or update readers.

Thumbnail Image: Lorin Both

Ongoing Coverage [STOCK: Haypp Group]: Q4 2025 Earnings Recap

Luke Wolgram — Sat, 21 Feb 2026 18:45:17 GMT

Haypp reported Q4 2025 numbers late last week that showed solid top-line growth, but lower-than-expected margins due to increased investment. The market decided to punish the stock a bit, but I view increased investment as a positive, as I believe Haypp should be using its advantages aggressively to build out permanent brand awareness and scale.

Let’s Dive In!

Group Numbers

Haypp reported +15% sales growth in Q4 2025 (+19% adjusted for forex). Sales growth was driven by Nicotine Pouches at +21%. A decline in snus impacted sales growth by -3%, while Vape and Heat-Not-Burn contributed a small positive +2%.

Adjusted EBIT in the quarter fell to 31.4M SEK (3% margin) vs 36.4M SEK (4% margin) in Q4 of 2024. This was due to increased investment, specifically in the U.S. and U.K. markets.

For the full 2025 year, revenue grew 4.6% to 3.85B SEK. Growth in 2025 was significantly impacted by shortages of Zyn, the most popular brand of nicotine pouches. Gross margin improved considerably to 18.5% from 15.0% in 2024, though adjusted EBITDA and adjusted EBIT did not see such a dramatic improvement. Adjusted EBITDA increased to 239M SEK (6.2% margin), and adjusted EBIT grew to 151M SEK (3.9% margin). Net profit declined from 45M SEK in 2024 to 42.5M SEK in 2025.

The number of orders decreased slightly in 2025 to 4.92M vs 4.95M in 2024, largely due to a decline in Snus and some discontinued divisions, as well as some impact from Zyn shortages. Nicotine Pouches almost certainly still grew, though Haypp does not appear to disclose NP orders specifically. Average order value increased slightly to 697 SEK from 690 SEK (about $75 USD per order). Active consumers saw a modest decline in 2025 to 1.13M, down from 1.15M in 2024, again, likely seeing some impact from Snus and Zyn shortages.

Charting active consumers gives a visual representation of current trends. Assessing the annual numbers would make it appear that active consumers are on the decline. The quarterly chart, however, shows that this trend has reversed for the last two quarters. Extrapolating recent trends suggests that Haypp will see a rebound in the annual active consumer numbers in 2026.

Core Markets

As a reminder, the Core segment is Haypp’s Swedish and Norway divisions, which are the most mature markets for Haypp’s products and make up around 70% of total revenue.

Core market revenue in Q4 2025 grew 6% and came in at 732M SEK. EBITDA increased +26% YoY from 61M SEK (8.9% margin) to 77.2M (10.5% margin), illustrating Haypp’s operating leverage potential as well as the value of the higher-margin Media & Insights segment. This EBITDA margin number is key to the overall business, in my opinion, as it has the potential to represent a ‘normalized’ level of EBITDA margin.

Active consumers in the Core segment declined slightly from 439k to 430k YoY related mostly to the decline in Snus.

Overall, I perceive this as a strong quarter in the Core segment.

Growth Markets

Growth markets for Haypp include the United States, the United Kingdom, Germany, Austria, and Switzerland. Haypp will exit Austria by mid-year, as Austria implemented legislation that only allows nicotine pouches to be sold in licensed tobacconist shops.

The U.S. is Haypp’s most important market by far. It is the largest nicotine pouch market in the world, yet online penetration remains exceptionally low. The U.K. is the next most important market.

Growth market sales in Q4 2025 increased to 278.7M, up 41% YoY. Adjusted for FX effects, sales increased 53%. NP volume increased 61%. The number of active consumers increased 52% to 169k from 111k in Q4 2024.

EBITDA was negative in the quarter at -4.4M SEK, down from +6.2M SEK in Q4 of 2024. This was due to increased investment in the U.S.

For the full 2025 year, growth market sales declined by -7% to 917.5k SEK from 989.7M in 2024. This decline was due to the Zyn shortage through the first three quarters of 2025.

Overall, I think these are great results, and I like seeing Haypp invest aggressively in the U.S., even to the point of running negative EBITDA. Haypp has a massive opportunity in NPs the U.S., and relinquishing that opportunity because they’re too scared to invest would be a huge mistake. These quarterly active consumer figures also suggest that momentum has returned to Haypp’s business in growth markets.

Emerging Markets

Emerging markets include vaping and heat-not-burn products in the UK, Sweden, and Germany.

Sales of emerging markets increased 40% YoY in Q4. EBITDA came in at -15.5M SEK, compared to -10.4M in Q4 last year. Active consumers increased by about 50%, rising from 21k to 31k.

For the full year, sales more than doubled from 71M SEK in 2024 to 149M SEK in 2025. EBITDA in 2024 was -33M SEK, which fell further to -52M SEK in 2025. Active consumers for the full year increased from 63k to 101k. Ultimately, this segment continues to show potential but remains considerably unprofitable for now. I expect this segment to maintain active consumer and sales growth in 2026, but with further unprofitability.

Final Thoughts

Haypp continues to dominate its core markets and continues to show accelerating momentum in growth markets. One major advantage that Haypp has in the U.S. is that it can use profits from Core markets to fund aggressive investment in Growth and Emerging markets. Competitors that only operate in the U.S. do not have this luxury.

The market had initially decided that Haypp’s aggressive investment is worthy of punishment, selling the stock down to 110 SEK from 120 SEK before the report. I was able to add to my position in the 110s. Since then, the stock has bounced back into the 120s, where I think it remains attractive.

Haypp is incredibly difficult to value. On the one hand, it trades cheap on a sales multiple, but high on any profitability or EBITDA multiple due to its low margins. The company has guided for 18-25% revenue growth going forward, and is targeting EBIT margins of 5.5% plus or minus 150 basis points. Some back-of-the-envelope math here would suggest 4.6B SEK of sales in 2026 (+20% revenue growth) and a normalized EBIT of $253M SEK (5.5% EBIT margin). At a current EV of about $4B SEK, the company is valued at 16X EV/2026 normalized EBIT. This appears to be a modest valuation for a company with Haypp’s growth prospects. It’s also perhaps worth noting that Haypp’s core market EBITDA margins are close to 10.5%, suggesting that EBIT margins may have some upside to 5.5% over the long run.

Sources: Haypp Investor Relations

Haypp has excellent reporting and disclosures. I strongly recommend checking out their investor presentations and reports.

Disclosure: Accounts I manage are long Haypp Group.

Thumbnail Image: Intricate Explorer

Ongoing Coverage [STOCK: XPEL Inc]: A DCF To Dertermine Fair Value

Luke Wolgram — Fri, 06 Feb 2026 17:20:17 GMT

This week’s post is relatively simple. I modeled Xpel’s income statement and FCF, and made a DCF to determine what market expectations are currently pricing in.

Let’s Dive In!

The assumptions made in the model are as follows:

All currency numbers are in millions of USD.
Revenue growth of 13% in 2025, 10% from 2026 to 2029, and 5% in 2030.
Gross margin increasing to 52% by 2030, as per management’s recent earnings call commentary that suggests gross margins can increase to 50-52% by bringing manufacturing in-house.
Sales and Marketing spending increasing to 11% of revenue.
General and Admin spending declining slowly from 18% of revenue in 2025 to 16% of revenue in 2030.
Depreciation and Amortization of 3% of revenue.
CAPEX of 2.5% of revenue.
Net change in working capital of 3% of revenue.
Share count increasing modestly to 27.8M shares outstanding by 2030.

The results of the model are as follows:

EPS of $2.47 in 2026 increasing to $5.25 in 2030 (16% CAGR).
FCF of $56.3M in 2026, increasing to $128.7M by 2030 (18% CAGR)
Fair equity value per share today of $54.32.

Here’s the model:

Xpel Model 2026

19.8KB ∙ XLSX file

Download

The font color of blue indicates numbers that can be changed according to one’s own assumptions.

Over time, I intend to update this model. I would like to add a sensitivity analysis, geographic revenue numbers, break out service and product revenue, include a “reverse DCF”, and potentially include quarterly numbers in addition to annual.

My takeaways are as follows:

The market is expecting approximately 10% revenue growth going forward. There could be upside in the stock if Xpel exceeds this level of revenue growth while maintaining margins.
I input my base assumptions. I did not “reverse fit” the numbers to get equity value per share close to the current stock price. However, because of this, we can assume that these numbers represent the market’s current expectations.

Disclosure: Accounts I manage are long Xpel Inc (XPEL).

Thumbnail Image: Joshua Koblin

Top Research & Pitches [January 2026]

Luke Wolgram — Fri, 30 Jan 2026 16:01:46 GMT

Hello Capital Light readers!

In January 2026, Capital Light published three pieces:

A new Actionable Idea on Haypp Group (Capital Light estimates 50-100% (15-26% CAGR) upside within 3 years).
Ongoing Coverage on Kneat (stacking new customer wins).
Ongoing Coverage on Japan as a theme. (preliminary research on two new “basket” ideas trading at under 10X EV/EBIT).

Every month, I highlight some of the top pitches, research, and reports from funds I follow.

Here are the top pitches and reports for December 2025 and January 2026!

Let’s dive in!

Top Pitches of December 2025 & January 2026

New Long Research Reports

Sohra Peak Capital published on D-BOX Technologies (TSX: DBO - $198M CAD)

The writeup frames D-BOX as a misunderstood haptic motion platform company whose real value is its theatrical seat royalties. These royalties are a recurring cut of the D-BOX ticket upcharge rather than one-time actuator sales. The report argues these royalties have ~99% incremental gross margin and are scaling with screen count, which has already driven a sharp step-up in profitability (it cites TTM adj. EBITDA margin rising from ~5.5% to ~25.6% over the last five quarters) and could support FY26 EPS of ~C$0.060, helped by accelerating screen additions (including 50 new screens added in Nov 2025). On valuation, it highlights forward P/E multiples implied by its EPS estimates of ~11.4x (FY26), ~8.8x (FY27), and ~6.7x (FY28) net of cash, plus an “absent multiple expansion” view of roughly a 15% free-cash-flow yield by FY28.
The memo credits the turnaround to an activist-led management reset, claiming prior leadership neglected the high-margin royalty engine and over-focused on lower-quality hardware initiatives. It argues the stock could re-rate toward 20–30x earnings (in line with “hardware-enabled, high-margin recurring revenue” comps) and says that would imply a base-case share price range of about C$1.82–C$2.62 over 24–36 months.

The Razor’s Edge published on Gitlab (NASDAQ: GTLB - $5.75B)

The writeup argues the GitLab thesis is shifting from a short-term “not dying” trade to a longer-term AI-driven monetization story, using a Fortune 100 customer’s rapid narrative change (from “Copilot makes GitLab obsolete” to “agents need identities/entitlements and governance”) as the key evidence.
It contends that AI agents may increase GitLab licensing and upgrades (especially toward Ultimate/Duo and hybrid consumption), because bots require auditable identities and higher-tier controls—so fears that agents structurally kill seat-based revenue are portrayed as outdated or wrong.

Kerrisdale Capital published on TDS (NYSE: TDS - $4.9B)

Kerrisdale argues TDS is materially undervalued after the $4.3B sale of US Cellular (now Array Digital, AD), which simplified the story and left two core businesses: TDS Telecom (fiber-focused wireline) and an 82%-owned tower platform (AD). The report says TDS Telecom’s fiber build targets less competitive Tier-2/3 markets and is further supported by the FCC’s E-ACAM program, improving the durability of cash flows as fiber penetration rises.
It also argues AD is mispriced: the tower business can lift tenancy and margins now that it’s run independently, and spectrum monetization should generate large special dividends. Using a sum-of-parts valuation, Kerrisdale estimates fair value of $68 per TDS share (~70% upside at the time).

New Short Research Reports

BMF Reports published on TROOPS Inc (NASDAQ: TROO - $465M)

The report highlights alleged cash/solvency mismatches and circular/related-party-style transactions, plus major legal overhang, concluding with a downside fair-value estimate of $0.25-$0.30 per share and a high risk of adverse events (e.g., delisting/trading halt).

Kerrisdale Capital published on Affirm Holdings Inc. (NASDAQ: AFRM - $23.5B)

Kerrisdale’s report argues that Affirm is being valued like a high-growth fintech even though it operates more like a leveraged consumer lender. The thesis is that recent GMV growth and thin GAAP profitability were helped by unusually benign credit conditions and by pushing more borrowing to repeat, weaker-credit users, with a business mix increasingly driven by high-APR installment loans (about half of revenue from interest, with much of the book priced above 10% APR and a large portion above 30%).
It flags two key downside risks: political/regulatory pressure on high-cost consumer credit (citing President Trump’s call to cap credit card APRs at 10% and arguing BNPL-style loans could be targeted next) and a weakening labor/consumer credit backdrop that would raise losses. Because it views reserves and capital as thin relative to the risk retained (including off-balance-sheet exposure), the report concludes the stock could re-rate toward lender-like valuation and estimates fair value around $17/share (roughly 80% downside) versus a cited price near $71.

Wolfpack Research published on FFRI (TSE: 3692 - ¥75.6B, $490M USD)

The report argues FFRI’s apparent revenue/profit turnaround is largely an accounting artifact tied to Japanese government cybersecurity subsidies (NEDO “K Program”). It claims FFRI books subsidy reimbursements routed through the Cyber Research Consortium (CRC) as topline revenue, implying that without these CRC-related funds, FY3/25 revenue would have been slightly down rather than up.
It highlights red flags such as declining R&D despite rising subsidy income, capitalization of CRC membership fees (which it says would materially reduce operating profit if expensed), and a segment reporting change that obscures subsidy dependence, alongside concerns around auditor changes and how peers typically record subsidies.

Gotham City Research published on Carvana Co (NYSE: CVNA - $67.5B)

The report alleges that Carvana’s reported profitability is materially propped up by opaque related-party economics, primarily DriveTime/Bridgecrest, rather than sustainable standalone performance. The authors claim DriveTime burned over $1B of cash in 2023–2024 and funded it with debt while operating at ~20x–40x leverage (estimating ~20x still in 2025), and they estimate DriveTime subsidies account for over 73% of CVNA Adj EBITDA and overstate Carvana’s 2023–2024 earnings by over $1B.
The report suggests that by using EV/Adj EBITDA multiple frameworks, shares are worth $100–$186, implying -61% to -79% downside.

Top Fund Letters of January 2026

Fairlight Capital

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Disclosure: The author is long shares of D-BOX Technologies. The author may initiate a long or short position in any security at any time, with no obligation to inform or update readers.

Ongoing Coverage [THEME: Japan]: Continuing The Search For Hidden Gems

Luke Wolgram — Fri, 23 Jan 2026 23:15:59 GMT

Hello Capital Light readers!

Japan continues to be an interesting market due to low valuations combined with a concentrated effort in the country to prioritize and increase shareholder returns.

I’ve discovered two new interesting ideas, both deploying stable, modestly growing B2B recurring revenue “razor-and-blades” business models. Both have strong balance sheets and trade at EV/EBIT multiples under 11.

This is my short preliminary look at both.

Let’s dive in!

Riken Keiki Co Ltd (TSE: 7734)

Riken Keiki is a Japanese company that manufactures and sells critical industrial gas detection and alarm equipment to companies in various sectors. Most notably, semiconductors (40% of revenue), with the remaining split among automobiles, machinery & steel (30%), Gas (12%), Petrochemical (11%), and others (remaining ~7%).

At first glance, Riken Keiko initially appears to be a basic commoditized hardware manufacturer. In reality, Riken Keiko is a specialized hardware sales business with attached recurring replacement, maintenance, and service revenue.

The equipment Riken Keiki sells generally lasts about 10 years, but many sensors within that equipment require more frequent replacement. Sensors require service, maintenance, and/or replacement at least once per year. This results in a very stable razor-and-blades-like business model whereby Riken Keiki sells the equipment initially, then sells sensor replacements and maintenance services on an ongoing basis for the next decade. It is an excellent and stable model.

With the stock price at ¥3,390 ($21.60 USD), Riken Keiki has a market cap of ¥147.9B ($940M USD) and an EV of ¥123.6B ($790M USD). The balance sheet is chock-full of cash - not a particular surprise in Japan. ~17% of the market cap is held in cash and short-term securities, while only ~1% of the market cap is short and long-term debt. The company pays a dividend of ¥50 (1.5% yield) per year in semi-annual payments, and has begun buying back shares over the last year, albeit repurchases remain limited for now.

The company’s valuation is modest at a trailing EV/EBITDA of 9, a P/E of 16, and a P/FCF of 16. Riken Keiki earns modest returns on capital with a TTM ROE of 12% and an ROIC of 14%. If, however, the company began to return cash to shareholders aggressively, these return metrics would increase.

Management has guided for ¥52B (+6% YoY) of revenue and ¥12B (+12.8% YoY) of operating income for the fiscal year ending March 31, 2026 (FY2026). This would put the FY2026 EV/EBIT multiple at 10.3X. Management has not stated any guidance for FY2027.

Fuji Seal International Inc (TSE: 7864)

Fuji Seal International provides shrink sleeve label application machines and label materials for customers in food and beverages, consumer products (staples such as personal care), and pharmaceuticals. Fuji Seal also provides ongoing service and support.

This is effectively another razor-and-blades business model. Once a machine is sold, that customer will then continue to buy ‘consumable’ labels. That said, my current understanding is that customers can source label materials from other suppliers. There is nothing proprietary about using Fuji Seal’s machines with Fuji Seal labels. Nonetheless, many customers choose to continue purchasing Fuji Seal labels. It’s also worth noting that shrink sleeves are more technically complex than simple sticker labels.

Revenue growth has generally been in the mid single digits. This is a low gross margin business with gross margins ranging from 18-22% over the last few years. Operating margins generally come in at 6-10%, while net income margins clock in at a thin 4-7%. Margins can jump around due to the timing of machinery sales.

Returns on capital are mediocre and have generally landed in the 6-10% range for ROE and ROIC.

Fuji Seal currently trades at ¥3290 ($20.96 USD), has a market cap of ¥172B ($1.1B USD), and an enterprise value of ¥144B ($920M USD). Cash and short-term investments sit at ¥36.4B on the balance sheet, while short and long-term debt are ¥7.7B, thus cash nets out to about ¥28.7B, or 16.7% of the market cap.

Fuji Seal’s valuation is very undemanding at a TTM P/E of 11, and a TTM EV/EBIT of 7. Often, when a stable company’s valuation is this low, the market is expecting a downturn in earnings. In this case, I was unable, so far at least, to find any reason to expect earnings to drop going forward, though the lumpiness of machine sales could push margins down in any particular quarter.

Conclusion

Fuji Seal and Riken Keiki are remarkably similar in their cash balances, recurring sales business models, and low valuations for their stability and growth rates. While I haven’t yet purchased shares of either, I continue to research them further. I may also decide to make these future actionable ideas, should further research continue to look positive.

Sources:

fiscal.ai
TIKR.com
https://www.rkiinstruments.com/
https://www.fujiseal.com/en/
Perplexity (AI)

Disclosure: As of the time of publishing, accounts I manage do not own the above two stocks. I may decide to purchase shares soon.

Thumbnail Image: Baguette Knight

Onging Coverage: [STOCK: Kneat.com]: Stacking Wins

Luke Wolgram — Fri, 16 Jan 2026 16:02:32 GMT

Hello Capital Light readers!

Kneat.com is a growing enterprise SaaS business that digitizes the validation process for companies in life sciences, pharma, biotech, and medical devices. Kneat’s software allows companies to entirely eliminate legacy paper-based systems, thereby increasing efficiency, decreasing risk of loss, and reducing the burden for complying with strict regulations and audits.

With the stock currently trading at around $4.60 as of the time of writing, the company has a market cap of $481M CAD and an EV of $451M. This puts the stock at 6X my estimated 2025 ending ARR, 6.6X Q3 2025 ending ARR and 6.9X TTM EV/Sales, vs large cap peer Veeva Systems at 9.6X EV/Sales. Kneat’s growth continues to be greater than 20% YoY (with ARR SaaS growth well over 30%), while Veeva’s has slowed to around 16%.

Kneat’s stock price is down 7% YTD vs IGV, the iShares Software ETF, down 6% YTD as software stocks have taken a beating due to AI disruption concerns. Despite those concerns, Kneat continues to land new customers. In fact, the pace of recent new win announcements has recently picked up!

Let’s dive in!

Stacking Wins

Big Wins

Kneat has issued two recent press releases detailing larger customer wins and has announced several smaller wins via LinkedIn.

The first PR was on December 17, 2025 for a Europe-based Global Specialty Chemicals Leader employing 30,000+ people across pharma, healthcare, nutrition, and consumer care. The customer plans to deploy Kneat Gx for Computer System Validation (CSV), Equipment Validation and electronic logbooks.

The second PR came on January 6, 2026 for a Global Biopharma company employing 13,000+ people, also headquartered in Europe. They’ll be deploying Kneat’s equipment validation platform at manufacturing sites.

Small Wins

Kneat has also had a number of small wins that haven’t been large enough to issue PRs for, but they do post these on their LinkedIn. Recent wins include Biocomposites, Celltrion, and Ellab. These smaller wins don’t necessarily move the needle individually, but they do illustrate Kneat’s continued ability to win over competitors, and collectively, could add up to meaningful revenue over time.

Q3 Earnings Recap

Q3 Numbers Snapshot:

Third-quarter 2025 total revenue reached $16.1 million, an increase of 26% year over year.
Third-quarter SaaS revenue reached $15.2 million, an increase of 33% year over year.
Third-quarter gross profit reaches $12.2 million, an increase of 25% year over year.
Gross margin for the quarter ended September 30, 2025 reaches 76%.
Annual Recurring Revenue (ARR)¹ at September 30, 2025, grows 37% year over year to $68.6 million.

Kneat reported Q3 earnings that disappointed the market as the stock dropped to nearly $4.00 per share immediately post-earnings. I felt this was too much of a negative reaction. I was able to pick up a few more shares at around $4.15 after having sold some shortly after Q2 earnings.

I posted the following thoughts on Microcapclub:

Absolute ARR growth bouncing back to $3.8M is great to see, and the overall miss was minor as far as I can tell. I had Kneat adding $4M of ARR this quarter, so they were pretty much on target. This is the most important metric for Kneat at this stage, in my personal opinion.
I was concerned after last quarter’s weak ARR growth, but this quarter confirms we are following a seasonal pattern more similar to 2023, in which ARR growth stalled in Q2 but picked up in Q3 and Q4. Combine this with new customer wins announced this year, and next year sets up for a year of further expansion among existing customers, which could result in an acceleration of ARR growth rates.
The valuation now sits at an EV/run rate ARR of about 6.5X. Let us not forget that this is a 75% (and potentially higher) gross margin business, an often forgotten, but tremendously important, consideration when using a sales multiple. Large cap peer Veeva runs at similar 75% gross margins, and has recently achieved operating margins of 30%. Veeva trades at double the sales multiple valuation of Kneat. A premium for Veeva is well justified given its larger and more profitable nature, but twice as much? Such a premium appears extreme to me. This also means an acquisition of Kneat by Veeva would be immediately accretive to Veeva shareholders. If we assume Kneat could one day achieve normalized 30% operating margins (a generous assumption, I must admit), we’d be trading at a 20X operating income multiple today for a recurring revenue SaaS business still growing over 30% YoY.
A 15% drop today seems out of line with these reported results, in my opinion. I remain long and added back some today after having sold some post-Q2.

If Q4 ARR growth comes in a little stronger, as it tends to do in most years, then Kneat could end 2025 at $75M of ARR. This is down from my original estimate of $80M by the end of the year.

Barring a large positive surprise in Q4, the full 2025 year will have shaken out as a mediocre year for Kneat. They’ll have added $15.3M of ARR if they achieve my $75M estimate. That’s down 30% from the $22.3M of ARR Kneat added in 2024. This isn’t entirely surprising. Customers delayed orders and implementations as a result of greater uncertainty with the U.S. administration’s tariff policies. Nonetheless, Kneat continued to execute on its land & expand model, adding 9 new strategic customers throughout the year (these are the ones they issue PRs for). Many of these are large companies with tens of thousands of employees globally. Although these customers were reluctant to commit to larger immediate deals this year, it bodes well for Kneat that they continue to win large enterprise customers that can expand their usage over time.

A New Risk Emerges: Software and AI

Software stocks have sold off to start 2026 as concerns around AI disruption continue to grow. This is because AI can write/generate code in far less time than it would have previously taken a human developer to write. In theory, this brings the cost of developing software down, which may result in more competition, and ultimately erode profit margins.

This is certainly a risk that is worth considering and monitoring. I do not have a strong opinion on it today.

Conclusion

Kneat’s valuation continues to get more attractive. It is rare to find a 30% ARR growth company trading at a mid-single-digit multiple of revenue. Even Kneat itself has spent most of its time as a public company trading at higher multiples, and has only traded at this valuation near the bottom of the bear market in 2022 and 2023. I’ve been a buyer a little above $4.00 per share recently. I continue to think that Kneat’s long-term prospects are strong.

Disclosure: Accounts I manage are long Kneat.com (KSI.TO).

Thumbnail Image: Toon Lambrechts

Capital Light in 2026

Luke Wolgram — Mon, 12 Jan 2026 15:05:48 GMT

Capital Light Frequency

Capital Light is changing its publishing cadence and types of posts going forward. In 2026, I am going to attempt to publish a new post every Friday (or possibly Saturday). These may vary greatly in length depending on how much there is to write about in any particular week, but for now, readers can expect a new post every week.

Capital Light Content Framework: “Initiating Coverage” and “Ongoing Coverage”

In 2026, Immediately Actionable Ideas (“IAIs”), along with other initial posts covering a stock or sector, will be rebranded to “Initiating Coverage”. If you view the home page of the newsletter, you’ll already see this change already in effect. This will consist of three types; STOCK, THEME, and ACTIONABLE IDEA. Examples may look like:

Initiating Coverage [STOCK: Kneat.com]: A Fast-Growing Niche Software Market Leader
Initiating Coverage [THEME: Nicotine Pouches]: The Fastest Growing Consumable Product Category This Decade
Initiating Coverage [ACTIONABLE IDEA #1]: A Capital-Light Microcap Trading At A 50% Discount to Peers

Initiating Coverage [STOCK] will simply be companies that aren’t necessarily immediately actionable, but are interesting to cover anyway. I may or may not own these already. Xpel, Kneat.com, and Auto Partner (all of which I am long) are the companies I’ve covered that would have fit this category when I initially began covering them.

Initiating Coverage [THEME] will be posts initially covering a particular market theme or sector. I have not yet published any of these, but I would like to do one on nicotine pouches soon. Themes may include specific product categories, more general sectors, or anything else that includes a group of companies exposed to the same external factor(s).

Initiating Coverage [ACTIONABLE IDEA] will directly replace IAIs, and will be pitches on ideas that I believe are immediately actionable, with some slight changes from IAIs. The stock may or may not be disclosed in the title. These will likely be shorter than my IAIs were, and really just punch straight to the point. Further analysis will then be conducted through Ongoing Coverage posts (discussed below). Although dependent on the opportunity set in the market at any one time, I am hoping to do these more often. A higher posting frequency will likely result in less initial detail, but this will also allow me to publish ideas faster and sooner. I had a couple of names in 2025 that I wanted to publish on, but they moved faster than I could write an IAI for, so I ended up having to scrap them. This new system should help address this problem.

In addition, update posts and/or posts that are not my first initial posts covering a name will now be branded as “Ongoing Coverage”. These will follow the same general format as Initial Coverage, but with an added category for multiple stocks covered at once, and/or general market commentary. Examples might look like the following:

Ongoing Coverage [STOCK: Kneat.com]: Q3 Earnings Update
Ongoing Coverage [THEME: Nicotine Pouches]: Current Developments
Ongoing Coverage [ACTIONABLE IDEA #1]: Catalysts for Valuation Discount Closure
Ongoing Coverage [MARKET]: Valuations Appear Unattractive

Ongoing Coverage will simply cover the same stocks as Initial Coverage, but on an ongoing basis. These will be the most common Friday posts.

The reasons for these changes are twofold. One, I have found it difficult to be consistent with my writing. I think a more robust framework around the types of posts I want to write will greatly help with consistency. Two, this format will make posts clearer to readers and make it easier to find and follow old posts. This is something I’ve struggled with as a reader of other investment bloggers. I hope that this framework will make it a bit easier to go back, find my initial coverage on a company, read it, then find my ongoing coverage to follow along with any changes, and ultimately catch up to the present with the complete story (to date).

Recapping 2025 and Where We Sit Today

In 2025, Capital Light published three long Immediately Actionable Ideas. One significantly outperformed, returning 185% from the date of publication. Given that I believe this was the first english writeup on this company in the world, I am quite pleased with this result. A second delivered a modest 13% return, and one disappointedly declined 29% from its price at the time of publication to the close of December 31, 2025 (though a strong rebound to start 2026 has resulted in this stock now sitting at a 19% decline). If we were to use baseball terms, I’d say one was a total grand slam, one was a single base hit, and one was a strikeout. Overall, a modest success. Anyone who equal-weighted these three ideas would have outperformed. Three ideas, though, are not enough to judge one’s stock-picking skill.

Thus far, the newsletter has focused mostly on microcaps or small smallcaps. This will remain the case, although I would like to add in some larger names as well going forward.

The newsletter will continue to have a focus on international stocks but will not shy away from U.S. and Canadian names as well, should opportunities in these geographies become more interesting once again.

I have not yet decided how to handle free content vs paid content, and this is something I ultimately need to solve for the newsletter to really thrive. I am considering a quarterly or monthly free post that highlights the best content, pitches, and resources I found or used that month.

Capital Light today stands at 10 paid subscribers and 1,721 free subscribers. Numbers that are simply too low to be sustainable. Readers, though, want frequency, and I did not deliver on that in 2025. I intend to deliver on this in 2026. The price remains unchanged for now, but should I decide to increase it in the future, all current paid subscribers will receive their current price for life, provided they don’t cancel. That said, it is unlikely that I will raise the price until I have a larger paid subscriber base.

Capital Light’s mission continues to be to find great companies early.

I look forward to bringing a greater frequency of posts to Capital Light readers in 2026!

Initiating Coverage [ACTIONABLE IDEA #4]: Haypp Group

Luke Wolgram — Sat, 10 Jan 2026 19:10:26 GMT

Hello Capital Light readers!

Cigarettes kill 8 million people per year.

If there were a product that could significantly reduce the risk of consuming nicotine, it would perhaps be the fastest-growing consumer product of the decade.

There is. They’re called nicotine pouches.

In 2018, the nicotine pouch industry sold 292 million units. In 2023, they sold 20.1 billion. A 5-year CAGR of 133%! It was a $5.4B market in 2024, and is projected to grow to $25B by 20301 (30% CAGR).

Haypp Group (STO: HAYPP - 4.13B SEK, 449M USD market cap) is the leading online distributor and e-commerce retailer of nicotine pouches. Capital Light believes the market is underestimating the opportunity set facing Haypp and sees 50-100% upside within 3 years (15-26% CAGR).

Conviction Level: High

Risk Level: Medium

ACTIONABLE IDEA #4: Haypp Group has the following characteristics:

Currency headwinds, discontinued divisions, and leading brand shortage effects masking strong underlying growth, resulting in investors and the market overlooking the business.
Complete and total domination of the online market with 85% market share in most regions.
Strong management with key connections in the nicotine industry.
Revenue growth acceleration going forward, with guidance suggesting a revenue growth CAGR of 18-25% to 2028.
Strong competitive advantages, including pricing advantages.
A reasonable starting valuation that could result in solid returns for shareholders if the company simply meets the midpoint of revenue growth guidance and margin guidance.
Capital Light believes there is as much as 100% upside over the next 3 years, leading to a compounded annual return of around 26% over those three years.

In this piece, I’ll cover:

A Brief Business History & Business Description
Competitive Positioning, Competitive Advantages, & Opportunity Set
Financials, Valuation & Expectations
Identifying Key Risks

Let’s Dive In!

Introduction

I’ve owned Haypp Group since mid-2024, originally purchasing shares near 90 SEK. Shares ran up to 115 SEK shortly after I purchased them, and then almost immediately, Mr. Market decided to take the share price on a rollercoaster ride. The stock price proceeded to decline to 55 SEK over the next few months, as investors feared regulatory bans on Haypp’s products. Unfortunately, I decided to cut my losses and sold half my position nearly at the bottom, despite holding my conviction that these bans would not occur. Sure enough, those fears were unfounded, and the stock then rallied for the next year to 185 SEK by September 2025. Since September, the stock has pulled back to 135 SEK, where it sits today. Given this degree of volatility, I wasn’t entirely comfortable pitching or discussing the stock publicly, other than a few posts on X here and there. However, the stock has experienced an orderly pullback over the last few months, and it appears we may be getting back to more normalized growth in 2026. As such, not only should the stock be easier to value, but I am also more comfortable pitching it now.

Brief Business History

The origins of Haypp Group date back to 2009, when Henrik Nordström and Linus Liljegren launched Snusbolaget. A website that sold snus online in Sweden, after frustrations with brick-and-mortar retail experiences.

The business grew substantially. By 2017, the business had grown to a point where true industry expertise was required. Enter Gavin O’Dowd. O’Down joined as CEO from British American Tobacco (where he led the Sweden and Norway division) and remains CEO of Haypp Group today. O’Dowd was brought in to professionalize and optimize operations, and lead further growth and expansion to international markets, including the juggernaut: The United States of America.

The company did 460M SEK ($49.9M USD) of sales in 2018, and rebranded to Haypp Group (pronounced like the word “hype”) in 2019. In 2019, Haypp Group posted 800M SEK ($86.8M USD) of sales, nearly doubling the business from a year earlier. Haypp Group continued to grow both organically and through acquisitions in the snus, vape, nicotine pouch, and other reduced-risk products markets. Trailing Twelve Months revenue as of the end of Q3 2025 sits at 3750M SEK ($406M USD) - an impressive 30% revenue CAGR from 2018-2025.

Business Description

Today, Haypp serves over 1 million unique customers, operating 11 e-commerce websites (generally geographically specific) across 7 different countries, split into three groups: Core (Sweden & Norway), Growth (US, UK, Germany, Austria), and Emerging (Vapes in UK, Sweden, & Germany and heat-not-burn products in UK).

Although Haypp sells various reduced-risk nicotine products across its sites, the main product of interest going forward is undoubtedly nicotine pouches.

Haypp’s business model is relatively simple. They buy products, such as nicotine pouches, from suppliers, usually the major brands like Zyn (owned by Philip Morris), store them in their warehouses, and then ship them out when they sell them on their website.

In addition to the online retailing and distribution, Haypp also offers valuable data & analytics services to nicotine brands. This is of significant value to the brands as they can see what’s trending in popularity, and innovate to quickly adapt to quickly-changing consumer preferences. Given Haypp’s significant scale, Haypp has data at a scale that no competitor could even come close to matching.

Competitive Positioning & Opportunity Set

Haypp’s competitive positioning is one of absolute dominance online, and yet Haypp only captures a tiny, but growing, fraction of the overall total nicotine and nicotine pouch market.

In Sweden and Norway, Haypp’s mature core markets, online sales of nicotine pouches account for 36% (Sweden) and 22% (Norway) of the overall nicotine pouch market. In the online market, Haypp has 85% market share, as of 2024.

In the U.S., online sales of nicotine pouches account for just 2.5% of the total nicotine pouch market, with the remaining 97.5% coming from physical retail locations, mostly convenience stores and grocery stores. Haypp also has about 85% market share of the online market in the U.S. The overall US market for nicotine pouches in 2025 is estimated to be around $5-6 billion. It’s expected to grow to $25B by 2030. Should the U.S. online market achieve even just 10% of total nicotine pouch sales, still well below mature markets like Sweden and Norway, Haypp’s business would be many multiples larger.

In the U.K., another key growth market for Haypp, online sales are about 7% of the total NP market.

The opportunity set for Haypp remains significant. This is a setup where a business with dominant share will not only grow with the fast-growing nicotine pouch market, but is also likely to take share from physical retail, creating a multiplicative growth tailwind. Haypp’s growth formula is effectively the following:

Haypp Growth = Growth of NP Market * Online’s Share of Total Market Gained +/- Market Share of Online Sales

Competitive Advantages

Haypp’s competitive advantages include scale, proprietary market data due to scale and partnerships, lower pricing for customers due to scale and less overhead than physical retail, high product assortment due to scale, regulatory leadership, and SEO that’s difficult to disrupt.

I intend to elaborate on these in future writings. But for now, I want to discuss Haypp’s considerable pricing and assortment advantages, as I believe this is a key component of the long thesis.

Haypp is able to price pouches significantly lower than physical retail. Haypp has much less overhead due to not operating physical locations. Haypp distributes from strategically located warehouses that can store pouches in bulk, as opposed to individual retail locations that can only carry small amounts of inventory. Haypp purchases directly from suppliers, as opposed to wholesalers that physical retail buys from.

This results in pricing that allows for a 30% discount to C-Stores in Core markets and as much as a 50% discount to C-Stores in Growth markets. The only downside for a consumer purchasing from Haypp is that they lose the convenience of instantly getting the product and must wait for shipping.

This substantial pricing advantage should result in a migration to online over time as awareness of online grows.

Financials, Valuation & Expectations

Haypp’s growth has been tremendous, but in 2025, it has slowed to a crawl. This is due to several factors. First, the snus business is in decline of about 5% per year, offsetting some of the growth in nicotine pouches. Second, a shortage of Zyn, the largest nicotine pouch brand, resulted in a surge of customers coming to Haypp’s sites in Q3 2024 and ordering various brands, skewing YoY comparisons. Third, various currency fluctuations have impacted the top line reported in SEK. These factors are masking Haypp’s underlying growth in nicotine pouches.

In Haypp’s most recent quarter, they reported 1% revenue growth YoY. However, adjusting for like-4-like sales, the adjusted growth rate came in at 15%. Adjusted for like-for-like, nicotine pouch revenue grew 18%, snus declined 5%, and vapes and heat-not-burn grew 2%.

There are some nuances here. I recommend readers check out Haypp’s investor presentations and reports themselves, as I think the company does a good job of communicating most of the variations affecting the numbers.

Through the first 9 months of 2025, Haypp’s sales are up 1.2% YoY.

In Haypp’s Capital Markets Day (“CMD”) from April 2025, management guided for an 18-25% revenue CAGR through to 2028 with 5.5% EBIT margins +/- 150 bps off of 2024 numbers, targeting 7-9B of revenue in 2028. 2025 will not come in that high, but management reiterated those growth rate targets on the Q3 2025 earnings call. If we make the simple assumption of 1% revenue growth for the full 2025 year, we start with a base of around 3.75B SEK. At an 18% CAGR, that would take revenue to 6.2B SEK for 2028, and EBIT would be expected to be 340M SEK. At a 25% CAGR, revenue would reach 7.3B SEK, and EBIT would 403M SEK. Let’s also just say the company grows faster, and reaches the high end of that 2028 revenue guidance number from the CMD at 9B SEK. EBIT would then be 495M SEK.

Going forward, I want to use more tables that display a range of stock price outcomes. This is what I’ve done here, based on varying revenue growth and an EBIT multiple by 2028.

In the case where the stock trades at a market cap of 12X EBIT, and revenue growth is on the low side of guidance at 18%, Shares of Haypp would end up at 109 SEK in 2028, down 19% from today, or a CAGR of -7% annually.

In the case where the stock trades at a market cap with a much higher multiple of 25X EBIT, the stock would be 303 SEK by 2028, good for a 31% CAGR.

Of course, the tables above illustrate a range of outcomes, but still have fixed variables such as 5.5% EBIT margins that, in reality, could fluctuate substantially (Haypp states +/- 150 bps on this margin target). I also believe revenue growth could be even higher than 30% if online purchases in the U.S. really take off, given the overall market is expected to grow at about 30% annually over the next 5 years.

I see enough upside here for me to own the stock. It’s not spectacular, though, and in the case where revenue growth comes in on the low side, it is possible that the stock declines slightly even 3 years from now.

I would be likely to be a seller, should the stock make a run into the mid to high 200s with no new information, as the risk:reward would no longer make sense for me there. Ultimately, I’d like to be able to hold Haypp long-term, and I will update my views as new information comes out.

Risks

I would group Haypp’s key risks into three broad categories:

Regulatory
Algorithmic
Competition

Investors have mostly seemed to focus on regulatory risks, and likely rightly so, as the regulation involved here could be make-or-break for Haypp. The first thing worth mentioning with regulation involves ensuring customers are age-verified. Haypp claims they have very high - virtually 100% - age verification rates at the point of sale (time or order). Recently, some governments have wanted to require age verification at time of delivery as well. Haypp has worked diligently with regulators to find a method/process that everyone can be confident works, but regulators can be fickle, and sometimes focus on what’s popular, rather than what actually makes sense.

Many countries are considering varying degrees of nicotine pouch bans. Canada, for example, has made selling pouches anywhere other than a physical retail location pharmacy illegal. Furthermore, only basic flavors like mint are permitted for sale. California has banned the online sale of flavored pouches, and Haypp has even been sued by the city of San Francisco in late 2024 for illegally selling pouches. This was settled, resulting in Haypp paying a $2.5M fine. Countries like Germany have banned retail sales, but oddly, online sales are permitted. France decided to completely ban all nicotine pouches outright. Regulators claim that pouches are popular among younger audiences and are thus a gateway to nicotine addiction, though mature markets like Sweden, which has the lowest smoking rates in Europe, suggest otherwise.

The regulation here is dynamic, fluid, and changing quickly. Over time, I am optimistic that governments recognize pouches as a reduced harm alternative to smoking cigarettes, rather than a harmful nicotine product.

The second key risk, algorithmic, involves the fact that Haypp heavily relies on SEO and top rankings in organic search engine results. Paid ads for nicotine products are generally not permitted by search engines like Google, although they often slip through anyway. Many of Haypp's sites occupy search positions that would be difficult to overtake. Haypp’s sites are nearly a decade old, which helps with high rankings. If competitors were able to optimize for changes in Google’s algorithm better, they could potentially start to move up in search results, challenging Haypp’s site’s positions. Another risk here, that I haven’t seen mentioned by others on Haypp, involves generative AI/LLMs/AI assistants. Haypp discussed this a bit in their 2025 CMD presentation.

I ran a search on Perplexity’s Comet browser for “where can I buy nicotine pouches usa” and received 11 sources. The first two were not Haypp sites, although the first one, New York Smoke Shop, does not appear to actually sell nicotine pouches, just cigars, vapes, and accessories. The second, gotpouches, appears to be a highly questionable website. Immediately, gotpouches recognized I was in Canada, and claimed to sell pouches online in Canada, which is illegal. Finally, the next three suggested by Perplexity in order were northerner, snusdaddy, and nicokick, all Haypp sites. Haypp will have to figure out how to optimize for rapidly evolving AI technology.

Finally, Haypp’s ~85% share in most markets combined with rapid growth is undoubtedly going to attract competition. Haypp will have to leverage its scale, SEO, and existing leadership position to maintain that share. Quite frankly, I expect share to decline over time, but this should be more than offset by the growth of nicotine pouches and total online sales taking share from physical retail.

Conclusion

Haypp is a strong, dominant business with excellent prospects, but is reliant on regulatory cooperation. I see substantial upside to the stock, should they maintain their current trajectory.

There is more to cover on this business that I didn’t get to in this piece. For anyone interested in immediately learning more, I would recommend Devin Lasarre’s excellent Substack, , where he covers the tobacco/nicotine industry in detail every week, including Haypp Group. Devin’s original February 2024 writeup on the company (which is better than mine) is how I originally learned about the stock.

I would also recommend that readers check out Haypp’s excellent investor relations page, linked just below, and their April 2025 Capital Markets Day specifically, where Gavin O’Dowd and other members of the company give excellent presentations explaining the business and opportunity in detail.

Disclosure: Accounts I manage are long Haypp Group (HAYPP).

Thumbnail Image: Hayppgroup.com News & Media

Additional Resources:

Haypp Investor Relations

Haypp Reports and Presentations

https://www.grandviewresearch.com/industry-analysis/nicotine-pouches-market-report

Ongoing Coverage [STOCK: XPEL]: Q3 Earnings Update

Luke Wolgram — Tue, 30 Dec 2025 17:02:04 GMT

Hello Capital Light readers!

Today, we’re updating my thoughts on Xpel.

But first, I want to share an excerpt from a recent article about Portfolio Manager Henry Ellenbogen on finding excellent businesses early. Ellenbogen’s funds have compounded at rates significantly above their benchmarks. I believe this is particularly relevant toXpel shareholders over the last several years.

Xpel: Transition from a Growth Story to a Margin and Growth Story

Xpel reported earnings for Q3 that beat expectations on revenue, but missed on net income and EPS. The revenue number was particularly strong, coming in at $125M vs analysts at just $119M, but margins were lower than expected resulting in EPS of $0.47 vs analysts at $0.52.

Xpel Q3 2025 Numbers - Capital Light Proprietary Model

Guidance for Q4 revenue came in at $123-125M, well above analyst expectations of $116M. Xpel acquired the Chinese distributor during Q3, which will show up in Q4’s revenue number (this is accounted for in the guidance).

Cash flow and the balance sheet are a bit messier due to some complications with the Chinese distributor acquisition. A little over $23M of other short-term liabilities now shows on the balance sheet, consisting of $12.5M of contingent consideration (representing the value of inventory acquired that may be sold above it’s net realizable value) and $10.9M of acquisition holdback payments. A further $12.6M of other long-term liabilities now shows, also related to the acquisition. Quite frankly, I’m far from having the ability to explain this, so I’ll simply pull Barry Wood’s (Xpel CFO) explanation from the call:

I thought it’d be useful to give a brief overview of the structure of the China transaction given its complexity. We -- first, we formed a new entity in which we have a 76% interest. This new entity then acquired the assets of our Chinese distributor. The purchase consideration for this totaled just under $53 million before discounting for time value of money. And there are essentially 3 components to the consideration. First, obviously, there was a cash upfront. Second, there was deferred consideration or really cash payable over a 4-year period. And thirdly, there was consideration contingent on future sales of what we considered as excess inventory as of the close date. This excess inventory was part of the inventory acquired and the contingency is structured such that we pay some consideration if the excess inventory is sold at a profit, but we effectively are not penalized if any of the excess inventory is sold at a loss or has never sold and needs to be written off.
As Ryan mentioned, in the overall transaction, we effectively added approximately $22 million in inventory if you consider inventory acquired and inventory contributed by minority holders. The first 2 items, the cash upfront and the deferred consideration are about 75% of the total consideration. And for various customary legal reasons unique to the transaction, only a portion of the cash paid upfront was actually remitted and the rest of the upfront payment will be paid very soon. And this is important to understand when you look at our balance sheet as we’ve broken these components out there. The remaining upfront payment still payable and the contingent consideration is reflected in the short term.
And other short-term liabilities on the balance sheet. The deferred consideration, the cash payable over a 4-year period is reflected in other long-term liabilities. So as Ryan mentioned, we’re certainly happy to get this deal behind us. It was somewhat a complicated deal, and there was a lot of hard work done by several people to make this happen. We have a great team in the region, and we are really looking forward to watching them grow that market.

Barry Wood, CFO - Xpel Q3 2025 Earnings Call

The accounting is one thing, but less widely understood are the implications of Xpel’s Chinese distributor acquisition. Over the last five years, Xpel has deployed a strategy of going direct in most major car markets around the world, primarily by acquiring distributors. This strategy allows Xpel to get “closer to the customer” (a company slogan) and have more control over the entire ecosystem. Xpel’s direct market approach has proven successful. In nearly every market, they’ve made significant growth progress within a year or two of going direct or acquiring direct distribution. France, Australia, Japan, India, and Thailand are all markets where Xpel has recently deployed this strategy. Of course, the US and Canada are Xpel’s most successful flagship geographies, where Xpel has always been direct.

China is the most significant market for Xpel outside of North America. It is the company’s third largest source of revenue after the U.S. and Canada. But growth has largely stalled out since 2020 due to a varied combination of factors. Competition in China stealing Xpel’s IP, strict COVID-related restrictions in China, lumpy distributor orders, a general slowing of the Chinese economy, a lack of investment for in-country training resources, and a premium product that wasn’t precise enough for the Chinese market.

Many of the problems within Xpel’s control have been addressed. They’ve been aggressively investing in better training in Asia. In 2024, Xpel renewed its Xpel China product line, introducing a more affordable film. They’ve also defended their intellectual property and even convinced the distributor to optimize order timing, significantly reducing the lumpiness of shipments. This distributor acquisition is the final key to unlocking a renewed China growth strategy, giving Xpel complete market control.

Xpel also revealed in the Q3 earnings report that they will be bringing manufacturing of their films in-house over the next three years. This will require investing $75-150M in new manufacturing capabilities. Long-term shareholders have speculated about this for many years. There are advantages that Xpel has received from using external suppliers - the ability to maintain an extraordinarily capital light model is perhaps the greatest of these - but as Xpel has grown, it has perhaps outgrown these advantages as well. If Xpel wants to get bigger without relying on external partners, this investment is necessary.

Xpel management stated on the call that by investing in manufacturing, gross margins could climb to the mid-50s, and operating margins could climb into the high 20s by as soon as 2028. This would nearly double today’s margins.

The stock has reacted positively, rising to the low $50s for the first time since early 2024. I have to admit some surprise by the strong reaction given earnings were down significantly in the quarter, but a mix of optimism around good guidance, the manufacturing announcement, and small caps finding favor have propelled the share price higher. We may have finally turned a corner on the stock price. I don’t see this momentum fading much in the current environment.

Thumbnail Image: Cory Rogers

Disclosure: Accounts I manage are long Xpel Inc (NASDAQ: XPEL).

Ongoing Coverage [MARKET]: Expensive Markets

Luke Wolgram — Wed, 24 Sep 2025 16:30:27 GMT

Hello Capital Light readers!

Those who read this newsletter almost certainly follow the markets, if not on a daily basis, then likely on a weekly one. Recently, the market has soared to new all-time highs. Highly speculative, unprofitable companies and even companies with literally no revenue, such as Oklo Inc (NASDAQ: OKLO), have left real companies in the dust as they’ve soared to new all-time highs. While this has been positive for my active trading account (which I rarely discuss here), it has made for a tough time in the fundamental investing value/GARP arena where I normally engage and post publicly.

There are plenty of good companies out there, but finding good prices on their stock has become more difficult.

What’s also been interesting is the divergence in stock price performance between these speculative companies and what I’d describe as “real” companies (you know, ones with actual earnings and sales). Although the market overall appears expensive and it has been difficult to find new ideas, these real companies have seemingly have mostly treaded water or even declined slightly in the last few weeks. I own some of these. Xpel, Seneca Foods (not previously covered on here), and others have recently seen 10% pullbacks in their stock price over the last month or so.

Essentially, if your company isn’t related to AI or datacenters, it appears to have had liquidity pulled out of it and into these AI/datacenter/speculative stocks instead.

I have debated including in this newsletter interesting trading setups, particularly during markets such as this one where I’m simply finding it difficult to find good new ideas, but active trading ideas are quite abundant. If this would be interesting, let me know. Other than that, I’ve had relatively little to write about, and hence my posting frequency has been very low.

Given that I simply feel there isn’t much to write about, I will likely experiment with shorter posts going forward for now, such as this one.

Thumbnail Image: Sebastian Schuster

Disclosure: Accounts I manage are long Xpel Inc (NASDAQ: XPEL) and Seneca Foods Corp (NASDAQ: SENEA).

Ongoing Coverage [STOCK: XPEL Inc]: Q2 Sales & Earnings Beat and New Products Launch

Luke Wolgram — Thu, 04 Sep 2025 17:31:09 GMT

Hello Capital Light readers!

Xpel reported Q2 2025 earnings on August 6, 2025. Results were strong, though guidance for Q3 2025 came in just below expectations.

This piece tackles the following:

Strong numbers, guidance lags: Breaking down how Q2 2025 stacked up against expectations.
Cash deployment: Where Xpel’s growing cash balance could be put to work.
Colored PPF: Why colored PPF could be an exciting new growth opportunity.
OEM Integrations: How Xpel is integrating its technology directly into online OEM ordering pages, starting with Tesla.

Let’s Dive In!

Strong Numbers, Guidance Lags

Xpel reported Q2 earnings that beat expectations a few weeks ago, though the stock’s reaction has been only slightly positive, likely due to Q3 revenue guidance coming in just below consensus estimates.

Here’s how the numbers shook out relative to Q2 2023, Q2 2024, and my bear, base, and bull case estimates for Q2 2025.

Xpel Numbers - Capital Light Proprietary Model

Xpel printed revenue above my bull case estimate, while gross margin landed in between the base and bull cases. The company spent nearly exactly what I expected on sales & marketing, but general and admin costs were inflated modestly relative to my expectations. This ultimately resulted in Xpel beating my operating income base case, but coming in well below the bull case number. Interest expense was virtually zero in the quarter as Xpel now carries no debt. A slight forex gain reverses the prior trend of negligible forex losses. Taxes were within expectations. This ultimately left EPS toward the higher end of the range between the base and bull cases.

Overall, it was an excellent quarter for Xpel. Revenue may have benefited from front-running of tariffs in the auto industry, though CEO Ryan Pape’s comments on the earnings call suggested that it was unclear what the impact of this was:

“I think, obviously, Q2 in the U.S. was quite exciting, you might say. In a sense it was punctuated by tariff anxiety to start. And for those who follow the car market, this jumped the U.S. SAAR in the first part of the quarter and then it slowed in the end as maybe some consumers tried to front-run pricing fears in the new car market.
Our view is really mixed as to whether that helped us, hurt us or what the impact was. Obviously, we would prefer a more stable environment month-to-month. But I don't think it was overwhelmingly positive for us because some of those gains at the front half of the quarter were given up in the second half. And if you look at the new car SAAR for the quarter, I think it was up modestly, like 2%, 2.5% from prior year. So I think this is just more of the same in terms of this choppy and uncertain environment that we've been in and expect to continue to be in.”
- Ryan Pape, Xpel Q2 2025 Earnings Call

The stock has had a fairly muted reaction to this quarter’s results. This is somewhat unlike big quarters in previous years, when Xpel’s stock price would jump considerably on a big earnings beat.

Pape gave the same guidance for Q3 that they had given for Q2, which is revenue in the $117-119M range. This was below the consensus guidance estimate of $121M in Q3. Management has historically tended to guide low, which was once again evidenced by the big revenue beat this quarter. The Q3 guidance also contrasts with earnings call statements, where July saw strength in Canada and in the dealership services business. Though if there was some demand pull forward due to tariffs, it would make sense that Q3 would come in below Q2’s revenue number.

Xpel’s Strong Balance Sheet and Cash Deployment Opportunities

Xpel now holds $49.6M of cash on the balance sheet with no debt due to the company’s continued strong cash flow. This is the most cash Xpel has ever had. Xpel now faces the challenge of either finding new things to invest in or returning the cash to shareholders. I believe there is no shortage of things to invest the cash in, particularly acquisitions. Although Xpel initiated a $50M buyback program earlier this year, I do not expect them to use buybacks unless the stock falls back into the high $20s or low $30s. Acquisitions are likely a more attractive way to deploy capital for now.

Xpel is working on finalizing its China strategy, which includes the eventual acquisition of the Chinese distributor. Xpel may also attempt to acquire the Brazilian distributor. Once this is achieved, I believe Xpel would directly own the distribution in all major car markets. Historically, Xpel has unlocked substantial growth opportunities in regions where it directly takes over distribution.

After that, Xpel could pursue further tuck-in strategic acquisitions of installers, but these tend to be on the smaller side. That leaves Xpel with an opportunity to explore something new. Of course, they must remain disciplined in their approach and not overpay. Fortunately, Xpel shareholders have a CEO who understands this:

“We're not going to be a footnote history of doing bad M&A and ruining a company. So I feel really good about the process that we're going through on this, and that will continue.”
- Ryan Pape, Xpel Q2 2025 Earnings Call

Last time I had a call with Ryan Pape (December 2024), he suggested that there are many complementary or adjacent verticals that Xpel could expand into via acquisition, but always stressed that the price needs to be right. On the earnings call, management suggested they’ve seen prices of potential acquisitions come down recently and that there are now more opportunities. Xpel’s significantly expanded team over the last few years will give the company more resources to pursue a greater volume and/or size of M&A going forward. Hence, I expect M&A activity to pick up going into 2026.

Colored PPF

As I mentioned in my earnings preview, I was expecting Xpel to launch its new colored PPF product in Q2. It took until Q3, but on Sept 2, 2025, the announcement was made. Xpel’s colored PPF is available in 16 color options.

Colored PPF options have been available for a couple of years from other brands. The category has grown quickly. Colored PPF positions PPF as a more direct competitor to vinyl film (there seems to be a constant confusion about this - to be clear, Xpel does not currently sell any vinyl wraps of any kind). The vinyl car wrap industry is several billion dollars, significantly larger than the PPF market. Colored PPF has the potential to take share from vinyl.

Colored PPF will likely be more expensive than both traditional PPF and vinyl, but comes with the added protective benefits of PPF. Vinyl has traditionally been a cheaper product meant for cosmetic purposes only. Colored PPF will be positioned as a premium product, and that likely means higher margin sales for Xpel and its installers, though it also means it is unlikely to completely disrupt vinyl for now. I do expect that colored PPF will take share from vinyl over time.

Xpel’s Technology Integrating into OEMs, Including Tesla

Tesla recently integrated Xpel PPF referrals directly into its website on the Model 3 and Model Y. This integration uses technology that Xpel developed internally. This is notable, as it means Xpel can roll this out to other OEMs as well (had this been instead built on Tesla’s side, it obviously would not roll out to other OEMs). I would not be surprised to see Rivian implement this next. Over time, I could see this rolling out to many more major auto-OEMs, further reducing the friction for customers to buy PPF.

This also renders the short thesis that Tesla and other OEMs would try to cut out Xpel entirely incorrect. Tesla is notorious for vertically integrating everything, and tried its own PPF offering for a while (leading to Xpel short reports). It now appears that Tesla is no longer offering this, or at the very least, not pushing it, and has decided to simply refer customers to Xpel directly instead.

This is perhaps more substantial than it initially appears. Not only does this speak to the quality and value of service that Xpel provides OEMs and their customers, but it also shows how difficult succeeding in PPF really is. If Tesla, a trillion-dollar megacorporation, cannot compete with Xpel, a relatively small billion-dollar company, then who can? The answer is likely no one.

Conclusion

Xpel’s colored PPF and Tesla integrations are exciting. Xpel has been working on these products for the last several years. I don’t expect these products to have an immediate impact on revenue growth, as it will take time to work out kinks with Tesla and any other OEM integrations, as well as time to train installers on how to properly install colored PPF. Over time, though, innovating on products and reducing the friction for customers to buy PPF (particularly at the time of vehicle purchase/order) should help Xpel sustain a mid-teens percentage revenue growth rate.

Thumbnail Image: Wes Tindel

Disclosure: Accounts I manage are long Xpel Inc (NASDAQ: XPEL).

Sources:

Xpel public filings & earnings call transcripts

Initiating Coverage [ACTIONABLE IDEA #3]: A Hidden Japanese Microcap Gem

Luke Wolgram — Sat, 16 Aug 2025 15:30:50 GMT

Hello Capital Light readers!

Capital Light has discovered a potential opportunity in a GARP Japanese stock.

Conviction Level: Medium

Risk Level: Medium

Immediately Actionable Idea #3 has the following characteristics:

The stock has good liquidity, but has a market cap under $100M USD. Thus, this idea is suitable for individual investors and funds that are able to invest in stocks under $100M USD in market cap.
The company has experienced accelerating revenue growth in the previous three quarters, with each exceeding 55% YoY. Previous growth rates were in the 40-50% range. Capital Light believes the company can sustain a high growth rate for the next quarter, and 15-20% annual revenue growth going forward after that.
Capital Light believes this company can sustainably earn returns on capital (ROC, ROA, ROE, ROIC) in excess of 30%.
This company is founder-CEO-led, operates with a capital and asset light model, generates strong free cash flow, has had zero dilution since IPO, and a clean balance sheet with $10 million USD in net cash.
This company has less than 30% customer penetration in its core vertical, leaving a significant growth runway going forward.
Key competitors are losing market share as this company scales.
Capital Light believes there is 70% immediate upside for the stock price today, and potential for multi-bagger returns over the next 5 years.
Platforms like TIKR, Koyfin, and Fiscal.AI aren’t updated for the company’s most recent quarter, leading to the company not yet showing up properly on screens.

Let’s Dive In!

Immediately Actionable Idea #3 is Asiro Inc. Asiro trades under the ticker “7378” on the Tokyo Stock Exchange. The company trades at around ¥2000 per share (a bit under $13 USD), has a market cap of ¥14.6B ($98.8M USD), and an enterprise value of ¥13B ($91.3M USD).

Asiro turned out to be a difficult and time-consuming stock to research given limited information, out-dated english reports, difficulties with translating up-to-date reports, and a reliance on sites like TIKR.com for financial statements. As a result, I am keeping Asiro as a very small position, and I think it is best suited for a basket approach to investing in Japan that I discussed in Exploring Japan Part 1. I would heavily encourage readers to continue their own research on this one.

Elevator Pitch

Asiro is a fast-growing capital-light operator of a network of niche legal websites in Japan. Asiro is a founder-CEO-led business that does not dilute shareholders and has a considerable runway for growth ahead of it. The company is reaching an inflection point where significant investment through the income statement in 2023 and 2024 is starting to pay off, and profitability and cash flow are rapidly inflecting higher as its revenue growth rate accelerates and expenses flatten.

Capital Light believes the market has not yet fully appreciated the shift in the business currently occurring and that substantial upside remains.

Capital Light believes there is 70% upside over the next twelve months to 15X our FY26 FCF estimate (¥3400/share) vs current multiples of 8X our FY26 FCF estimate today, and just 11X LTM FCF.

Business Overview & History

Asiro owns and operates a series of legal websites under the “Ben-Navi” brand with the goal of connecting lawyers and clients, for which the company collects advertising and referral fees. The company has three main segments: Legal media, human resources, and insurance services. The vast majority of revenue today is generated by the legal media segment, but there is an opportunity to leverage Asiro’s existing legal network to grow the HR and insurance segments going forward.

Brief Business History

Asiro was founded by Hiroto Nakayama in 2009. Nakayama has been the Chairman, President, and CEO since. Nakayama owns around 25% of the total shares outstanding today.

In 2016, Nakayama sold a majority interest to a private equity firm called J-STAR. The deal allowed Nayakama to remain CEO. Asiro IPO’d in July of 2021 during a hot market, and J-STAR sold at least a portion of their stake, such that they’re no longer a majority owner (it does not appear to be disclosed how much, if any, J-STAR still holds).

Asiro expanded into HR services in 2020, followed by an insurance business in 2022.

Business Segments

Legal Media (>90% of revenue)

Asiro’s legal websites operate under the “Ben-Navi” brand. The company has a general website, along with numerous specialized legal-niche websites.1 These specialized legal-niche websites focus on specific legal problem areas such as divorce, traffic accidents, criminal cases, labor issues, corporate law, and more.

These websites host SEO-optimized legal content and lawyer forums. Their main purpose is to connect lawyers with clients, for which the company collects advertising and referral fees. Asiro targets medium-sized law firms consisting of more than one lawyer, as multi-person firms often have more advertising resources than single-lawyer operations.

Asiro’s legal media segment growth has a multiplicative effect, whereby revenue growth is a function of new customers added times the amount of spend per customer. Both of these have been increasing.

Human Resources (~4-5% of revenue)

In April of 2020, Asiro expanded into Human Resources services by launching several job recruitment platform websites.2 These websites attempt to match hiring law firms with potential lawyers. Asiro has also expanded this segment to include sites for directors, accountants, and administrative staff.

Asiro operated a temporary staffing services business called HITOTASU Inc, but this was divested in April 2025.3

Insurance (~2% of Revenue)

Asiro’s insurance business, launched in 2022, allows individuals to purchase insurance to cover various lawyer fees. This insurance product is meant to be short-term in nature and for relatively small amounts.

Information on this segment is extremely limited, and it now appears that it may have been discontinued.4 Asiro’s FY23-FY25 investor presentation suggests that the insurance segment has ended new sales, and the link on Asiro’s investor relations website now also suggests that new sales have been paused as of the end of April 2025. Given it only generated ¥64M ($440k USD) of revenue in FY23, it remains immaterial for now and serves mostly as a call option on the business at this point. It is unclear whether Asiro will continue to pursue insurance going forward.

Total Addressable Market, & Demographic Tailwinds

Japan has over 18,400 law firms5. Of these, 11.4k are single-person firms, while the remaining 7k are multi-lawyer firms. As of the FY23 investor presentation, Asiro had captured 983 firms as customers, representing 5.4% of the total market and 14% of multi-lawyer firms. Revenue has nearly doubled since then, so while the company has not published a more up-to-date figure, it is likely a safe assumption that this figure now approaches 1500-2000 firms, or as much as 10% of all law firms and 20-30% of multi-lawyer firms in Japan.

Current demographic trends have Japan’s population declining,6 while the number of lawyers and firms continues to grow. This means the market for clients will become more competitive over time. Perhaps counterintuitively, this serves as a structural tailwind for Asiro, as firms will be forced to increase advertising efforts and budgets to reach a diminishing pool of clients. Asiro is well-positioned to continue increasing both absolute customer counts as law firms seek new leads, and advertising revenue per customer as acquiring clients becomes more competitive and expensive.

Assessing The Competition

Asiro has two main competitors. Bengo4 (TSE: 6027) and Coconala (TSE: 4176).

Bengo4.com (meaning ‘lawyer dot com’) is Japan’s largest online general lawyer platform.7 Bengo also owns the e-signature platform known as CloudSign. Bengo4’s website is a general-purpose lawyer platform with forums and Q&A for both lawyers and non-lawyer users. Bengo4 tends to win smaller and individual firms with a low-cost subscription and paywalled content. Bengo4’s website revenue has stalled out at around ¥1.2B over the last 5 quarters.8

Asiro’s more targeted niche website approach focuses on driving clients to lawyers, resulting in higher conversion rates and much higher levels of revenue per firm/customer. Bengo charges between ¥10,000 ($68 USD) and ¥28,000 ($190 USD) monthly for various plans, while Asiro is generating over ¥250,000 ($1690 USD) per customer monthly.

Bengo4 is somewhat limited in its capacity to compete directly with Asiro due to its low-cost subscription model. Asiro deploys a far more targeted approach designed to drive clients directly to lawyers and firms in exchange for higher-cost advertising and referral fees rather than a content-based, low-cost subscription model. Both companies target similar pools of customers, but the different business models mean they aren’t necessarily competing directly.

My current understanding of Coconala is that their lawyer website is structured similarly to a marketplace, but still uses a subscription-based model.9 Coconala’s model is more premium than Bengo’s and therefore costs more. Users can browse Coconala’s website to find listings for lawyers that might suit their needs. Coconala operates somewhere in between Bengo4 and Asiro.

Recent financials suggest that Asiro has recently been successful in taking share from its competitors.

Financials and Valuation

Asiro has grown rapidly since its IPO in 2021, with revenue climbing from ¥1.5B ($10M USD) in 2021 to ¥6B ($40M USD) in the LTM. That’s a 5-year CAGR of nearly 30%. Almost all of this has been through organic expansion of the legal media segment.

Profits, on the other hand, have not experienced stable growth, as the company made the decision to forgo profits and invest through the income statement throughout 2023 and 2024, nearly doubling SG&A from 2022. These investments revamped Asiro’s websites, but resulted in net income falling from ¥228M ($1.5M USD) in 2021 and ¥343M ($2.3M USD) in 2022 to negative ¥12M ($0.08M USD) in 2023.

2024 saw that bounce back slightly to ¥142M ($0.96M USD) before the company saw an inflection in 2025, where the company has now earned a whopping ¥868M ($5.89M USD) of net income from FQ2 of 2024 through FQ1 of 2025 - I’m using this as it’s the most recent data on available on TIKR, though the company has since reported FQ2 of 2025 (more on this below). Operating income has soared to ¥1423M ($9.63M USD) (albeit with what appears to be a one-time ¥223M other operating expense benefit). Most of this operating income was generated in FQ4 of 2024 and FQ1 of 2025, as SG&A has declined slightly YoY while revenue growth accelerated.

Balance Sheet

As of the end of FQ1 2025, Asiro holds ¥1.9B ($12.9M USD) of cash on the balance sheet, offset by ¥270M ($1.84M USD) of long-term debt and $130M ($0.90M USD) of short-term borrowings, for a net cash position of ¥1.5B (10.2M USD).

Total assets exceed ¥4.5B (¥30M USD) while total liabilities sit at ¥1.79B ($12.2M USD), leaving total equity at ¥2.73B ($18.6M USD).

Overall, it’s a strong balance sheet, though it’s worth noting that goodwill makes up ¥1.14B ($7.8M USD) of Asiro’s total assets.

Returns on Capital

Asiro’s returns on capital have increased as a result of its profitability inflection seen in the last two quarters. This makes sense, as Asiro’s investments are mainly through the income statement. This means Asiro should be able to sustain these returns as long as they maintain profitability.

Investment Cases

Asiro’s fiscal year ends October 2. This means Q1 would be from Oct 3 to Jan 2, which the company displays as November through January. The company therefore displays its quarters as the following, but because the quarter ends early in the month, most of that ending month occurs in the following quarter:

25FQ1 Nov of 2024 -Jan of 2025

25FQ2 Feb-Apr of 2025

25FQ3 May-Jul of 2025

25FQ4 Aug-Oct of 2025

Asiro generated ¥1.23B ($8.4M USD) of FCF from 24FQ2 through 25FQ1 (essentially calendar year 2024) with the majority of that FCF coming in the final two quarters.

Asiro has also now reported FQ2 2025, in which they did ¥1809M ($12.3M USD) of revenue (up 58% YoY) and ¥446M ($3.0M USD) of operating income (up 446% YoY). For simplicity, my LTM numbers shown below do not include FQ2 2025, as it was not available on TIKR or other platforms, but my projections take it into consideration.

I have included the FQ2 2025 Japanese slide presentation at the bottom of this piece, where I would encourage those interested to upload the presentation to ChatGPT 5 and ask it to translate specific slides or for specific financial metrics (ChatGPT struggles if you try to translate the entire thing at once).

Base Case

My base case valuation values Asiro at ¥3400 per share within 12 months for upside of 70% (¥1400 per share) to the current price of ~¥2000 per share. This is based on a 15X multiple on my FY26 (October 2025 to Sept 2026) FCF estimate of ¥1.67B ($11.4M USD). This FCF estimate is based on 40% revenue growth in FY25 and a further 20% revenue growth in FY26, a 27% EBIT margin in FY26 (vs LTM EBIT margin of 24%), and a FCF margin of 20.9% (vs LTM FCF margin of 20.4%).

Asiro’s depreciation is high due to the way it depreciates lease assets. Their CAPEX requirements are low, and their change in NWC jumps around substantially. I have forecasted fairly large changes in NWC, though I think it’s unlikely this will materialize, and that actual changes in NWC will be smaller.

I believe these estimates are moderate on revenue growth and conservative on margins.

Bear Case

A true bear case here is, quite frankly, anyone’s guess. However, I would suggest that a bear case involves little to no more growth, and Asiro simply stays at it’s TTM level of profitability and cash flow (around ¥1.25B ($8.5M USD) of FCF). In this scenario, I’d expect the FCF multiple to trade down to 10X (from 11X today), resulting in a share price of ¥1675 for downside of 16%.

Note that this still assumes risk factors do not play out and that the company continues to rank highly in search results. In a worst-case scenario, such as traffic loss due to extreme changes in SEO by companies like Google, there could be substantially more downside.

Bull Case

My bull case assumes ¥2B of FCF by FY26 and a 16X FCF multiple for a share price of ¥4378 or upside of 119%. In this scenario, the company maintains or exceeds revenue growth rate assumptions shown above, and sees incremental margins remain high and sustainable.

Why The Opportunity Exists

There are several reasons why this opportunity exists. First, Asiro, with a market cap of ¥14.6B ($99.5M USD) is a small microcap company in Japan. Investor awareness is very low. Its size automatically reduces the number of investors looking at it.

Second, a market overhang remains from Asiro’s investment period. It is only in the last three quarters that profits have inflected higher. Annualizing these last three quarters gets Asiro to around ¥1700M of EBIT (slightly below my ¥1746 estimate for FY25). This means the stock still trades at a market cap of under 9X EBIT. This also means that the company does not yet screen well, as investors screening for annual profit or trailing twelve months profit growth may not realize how quickly Asiro’s profits have ramped up.

Risks & Mitigants

There are several key risks worth considering for Asiro.

First, Asiro relies heavily on Search Engine Optimization (“SEO”). Should their websites fall in search rankings, they’ll likely lose traffic, which would hurt conversion figures. Furthermore, client (lawyer) acquisition costs for Asiro would increase. Google and other search engines could change their algorithms, resulting in either temporary or permanent unfavorability for Asiro. This is mitigated somewhat by Asiro’s multi-site organic content strategy. Due to the content on Asiro’s sites, it is unlikely to be marked as spam by search engines.

Second, there is key man risk with Nakayama. Should he leave, quit, or exit, it would likely be difficult to find a similarly motivated replacement.

Third, there is regulatory risk with respect to how lawyers can advertise. Should regulations become more strict, Asiro’s advertising revenue could deteriorate. It is notable that this is less of a problem for Asiro’s competitors, who rely more on subscription revenue than advertising revenue. Fees for referrals could be limited or capped.

Finally, there is capital allocation and acquisition/execution risk as Asiro expands into new verticals such as human resources and insurance. A bad acquisition has the potential to reduce shareholder returns, or ruin the company in a worst-case scenario.

Conclusion

Asiro is a high-growth, capital light advertising business currently at an inflection point of moving toward higher profitability after a period of significant investment. At just 11X TTM FCF, 10X FY25E FCF, and 8X FY26E FCF, Capital Light believes there is 70% upside to 15X our FY26E FCF number within 12 months.

Files:

Asiro Investor Presentation Dec 2023

1.28MB ∙ PDF file

Download

Asiro Model 2025

16.7KB ∙ XLSX file

Download

Asiro Inc Fq2 2025 Presentation Japanese

6.27MB ∙ PDF file

Download

I recommend using ChatGPT 5 for translation.

Thumbnail Image: HAYASHI KANNA

Disclosure: Accounts I manage are long Asiro Inc (TSE: 7378).

https://en.asiro.co.jp/ir/

https://asiro.co.jp/business/legal-hr/

https://www.marketscreener.com/quote/stock/ASIRO-INC-125138251/news/Akira-Suzuki-agreed-to-acquire-HITOTASU-Inc-from-ASIRO-Inc--49726398/

https://kailash.co.jp/

https://www.lawsapo.com/column/article8/

https://www.worldometers.info/world-population/japan-population/

https://www.bengo4.com/corporate/en/ir/

https://contents.xj-storage.jp/xcontents/AS80401/e659de0a/0ac1/4a2b/97b8/870edb0173d1/20250813123203455s.pdf

https://coconala.co.jp/en/ir/

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