03-21-2019, 11:34 AM
I work in commercial construction/design, which is also a backlog dependent industry, and I am very comfortable investing in companies that carry backlog and use it as a metric of future revenue. The backlog number itself, and how it grows from month to month, paints a picture of how efficiently the company operates and how much demand there is for their services.
As a TEUM investor, A major buy indicator I am looking for is the combination of accelerated backlog conversion with a growing backlog number. To see both accelerated conversion and increased backlog happening represents exponential growth and it puts a smile on this investor's face.
When a company is running sideways, the backlog will be high/low from month to month (alternating) as existing unfulfilled contracts carry over while others clear out with the occasional contract win. When a company is doing poorly, the backlog will go down with revenue as no new contracts are awarded. It's such a simple metric to follow and understand and makes it easy to know when you should buy/hold/sell.
Regarding the validity of their customers: This question was presented directly to them in a CC a few quarters back during the post conference Q&A. I am lazy so I am not going to dig it up, but the response was essentially that they work in an industry where there is potential for customer poaching so the identities are held back whenever possible. Obviously if they land a whale contract with a publicly traded company, they will disclose this as the information will have to be shared with the share holders (for example, Citrix). It really is that simple and not something to be concerned with.
As a TEUM investor, A major buy indicator I am looking for is the combination of accelerated backlog conversion with a growing backlog number. To see both accelerated conversion and increased backlog happening represents exponential growth and it puts a smile on this investor's face.
When a company is running sideways, the backlog will be high/low from month to month (alternating) as existing unfulfilled contracts carry over while others clear out with the occasional contract win. When a company is doing poorly, the backlog will go down with revenue as no new contracts are awarded. It's such a simple metric to follow and understand and makes it easy to know when you should buy/hold/sell.
Regarding the validity of their customers: This question was presented directly to them in a CC a few quarters back during the post conference Q&A. I am lazy so I am not going to dig it up, but the response was essentially that they work in an industry where there is potential for customer poaching so the identities are held back whenever possible. Obviously if they land a whale contract with a publicly traded company, they will disclose this as the information will have to be shared with the share holders (for example, Citrix). It really is that simple and not something to be concerned with.