Intellicheck: Undervalued After Losing 75% Of Its Value

Summary

Intellicheck is a technology firm that specializes in designing, integrating, and selling identity verification solutions for commercial retail and banking fraud prevention, access control, and identity validation.

Intellicheck’s stock lost almost 75% of its value in the last 52 weeks.

Recent revenue growth rates have been high and with large investments into its marketing department, its technology, and internationalization I expect them to continue its robust growth rate.

Assuming a significant drop in its operating expense margin, combined with long-term growth opportunities, the stock is extremely undervalued according to its 5 forward EV/EBITDA.

Investors should note however that the risk for this stock is higher than average.

RichLegg/E+ via Getty Images Investment thesis

Intellicheck’s (NASDAQ: IDN ) stock lost almost three-quarters of its value in the last 52 weeks. Recent revenue growth rates have been high and with large investments into its marketing department, its technology, and internationalization I expect them to continue its robust growth rate. With the assumptions that this growth rate will continue, a significant drop in its operating expense margin, and long-term opportunities, the stock is extremely undervalued according to its 5-year forward EV/EBITDA. Investors should note however that the risk for this stock is higher than average. Furthermore, the stock hasn’t left its negative momentum period yet, which might impose more future losses. Table of contents:

> Introducing Intellicheck and its industry

Stock performance

Fundamental analysis

Risks

Valuation

Conclusion

Introducing Intellicheck

Intellicheck is a technology firm that specializes in designing, integrating, and selling identity verification solutions for commercial retail and banking fraud prevention, access control, and identity validation. ID Check®, a solution for avoiding identity fraud in any industry offered via smart devices, the internet, or integration with a customer’s system, is one of Intellicheck’s solutions.

Their technologies solve problems such as the ones shown below: Source: Intellicheck’s homepage Industry

Intellicheck is part of the Fraud Detection and Prevention Market. I selected several companies which have exposure to this market to create an industry proxy to benchmark Intellicheck’s performances throughout this article. I must however add a side note that it’s not a very accurate peer group, as most of them are not pure fraud detection and prevention companies and are significantly bigger than Intellicheck. So in this article, I won’t add too much weight to the peer group.

Selection of companies with exposure to the Fraud Detection and Prevention Market: Company name Symbol International Business Machines Corporation (NYSE: IBM ) Fair Isaac Corporation (NYSE: FICO ) Oracle Corporation (NYSE: ORCL ) DXC Technology Company (NYSE: DXC ) SAP SE (NYSE: SAP ) ACI Worldwide, Inc. (NASDAQ: ACIW ) Fiserv, Inc. (NASDAQ: FISV ) NICE Ltd. (TLV: NICE ) RELX PLC (LON: REL) Source: Seeking Alpha Stock performance Before we delve into the fundamental analysis, let’s take a look at the stock performance. I computed a plot of the stock returns of the last 3 years. Source: Prices from Yahoo Finance The industry underperformed the market. Intellicheck has had massive swings in the last three years. While it massively outperformed its benchmarks at multiple points in time, after three years its return is significantly lower after a rough year. Price changes in the last 52 weeks Source: Seeking AlphaIntellicheck has lost an absurd 72.66% since its 52 week high. The negative momentum hasn’t stopped yet, as for last month and last 3 months returns are still significantly negative. Fundamental performance An essential part of investment analysis is fundamental analysis. I split the fundamental analysis into two parts, (revenue) growth analysis and margin analysis. Revenue growth Industry Growth Research has shown that future business growth is very dependent on industry growth. According to a Valuates Reports report , the Fraud Detection and Prevention market is expected to grow at an impressive CAGR (compounded annual growth rate) of 15.3% by 2027.According to the report, the expansion of the Fraud Detection and Prevention market is predicted to be fueled by the rising amount of online transactions as a result of digitalization. As fraudsters continue to develop and outperform the present security system, the number of financial institutions experiencing losses from financial crimes is rapidly increasing.Moreover, businesses have historically utilized authentication systems to secure customer credentials and sensitive data. However, as customer-facing app fraud becomes more sophisticated, businesses are turning to advanced authentication solutions such as single-factor and multi-factor authentication, as well as voice biometrics. Intellicheck historical growth Growth performance of Intellicheck and the industry in the last few years: Stock Revenue […]

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