Dom’s Stock Deep Dive on Semler Scientific -100x Returns in the Making?
Stock Ticker: OTCPK: SMLR
The ability to identify life-threatening diseases early and in asymptomatic patients with high accuracy rates is priceless. To be able to accomplish this feat while contributing to making healthcare costs lower for patients and providers is game-changing. Semler Scientific, Inc. is doing exactly that with their patented QuantaFlo technology and proprietary risk assessment software for physicians and health insurance companies.
Semler Scientific is focused on providing technology solutions to improve the clinical effectiveness and efficiency of healthcare providers. Their mission statement from their website states, “Our mission is to develop, manufacture and market innovative proprietary products and services that assist our customers in evaluating and treating chronic diseases.” This is a mission every investor should be able to get behind which in turn will allow Semler to continue innovating and saving lives.
What Disease Testing Does Semler Scientific Solve For? What is so special?
Semler Scientific has disrupted how Peripheral Arterial Disease (PAD) is tested for and how to catch the disease earlier in life. Their Patented QuantaFlo technology saves significant time in the process of how you measure for PAD and the test can be completed in 5 minutes with results. This saves the patient and doctor time, makes the process to serve these patients much more efficient, and the results are more accurate than previous testing methods.
In summary, this technology is patented until 2027, is better than all the other technologies doing this type of testing, creates a better customer experience, and allows the doctor to see more patients which drives revenue for the physicians and hospital. This is a win-win-win scenario for all parties involved in this experience.
What is PAD and what is the Target Audience Market for Preventing it? What Problems Arise if You Don’t Identify PAD in the Early Stages?
Pad is a condition where the arteries were serving the extremities (peripheries) narrow and reduce the blood flow which over time results in further health issues like heart failure, diabetes, and renal failure. All of these future health issues can lead to death fairly quickly depending on the patient.
Below is a look at how large the opportunity is for Semler Scientific to address early detection and prevention for PAD below.
There is believed to be 80 million U.S. patients who could be tested based on a certain criterion and over 25% may have PAD, but only 1 to 2 million will get diagnosed conventionally. PAD is highly underdiagnosed and 75% of patients are asymptomatic and their doctor misses the diagnosis. Early detection will save more lives, prevent further acute care, save the U.S. government significant annual costs in healthcare due to eliminating the need for surgery, giving the patient a chance to reverse PA in early stages, preventing future healthcare procedures, and preventing death. The customer base for QuantaFlo includes health insurance plans, physician groups, and home risk assessment companies.
The Financial Part of the Story: 10x, 100x, and beyond?
Now that we have identified the important problems Semler Scientific is trying to solve, let’s review the financial perspective of the business. Can this stock be a future 10x or even 100x multi-bagger?
Let’s start with what questions should you be able to answer for a company when looking to see if it could be a stock that can yield a potential 100x return?
· How important are the problems the company is solving? In this case, it is life and death problems that Semler Scientific is solving with a large total addressable market (TAM).
· Is the stock a small market cap stock or a larger stock that has the growth trajectory to exponentially grow?
· Am I willing to hold this stock for a long period of time to allow it time to grow and evolve and create new revenue streams?
· Is the company led by a founder CEO and good leadership team?
· Does the company have a competitive moat and expanded optionality in its market?
Besides identifying a great company when it is a small or micro-cap stock, you need to see how many positive financial indicators the company meets such as:
· Significant revenue growth
· Reoccurring revenue and low customer acquisition costs
· High gross margins that can lead to compounding future free cash flows
· No debt and efficiencies in processes they have that, in turn, result in high operating margins
· Eventually become profitable or have a route to profitability (you want companies to invest in themselves and their growth opportunities to capture market share)
Semler Scientific is a $700M market cap stock and checks all of the other boxes. It is starting to get hedge fund and institutional backing and has over 26% insider ownership, so leadership has skin in the game. This company operates at 94% gross margins, I repeat 94% gross margins, is already profitable, revenue growth at 64% year over year, and no debt. This is a recipe for long-term success! Check out some of these images from Simply Wallst. and Semler Scientific’s investor presentation.
Future Growth Catalysts that Expand Semler’s Optionality & Bring New Revenue Steams
Semler scientific is not resting on its laurels and success of QuantaFlo Technology, Software as a Service Platform, and their Wellchec Testing Service for their customers. Instead Semler Scientific is thinking about things in a holistic approach by wanting to build a platform or ecosystem of health products and services that integrate and complement the solutions they have today. Semler Scientific is working with three different private firms to create three different healthcare solutions that are patented, already FDA approved, and will continue to help save lives like QuantaFlo.
The Semler Scientific Ecosystem could grow its revenue streams and customer base tremendously if these solutions can identify potential healthcare risks early like QuantaFlo has, save patients time with healthcare visits, and provide more accurate results. I am confident they will deliver on this type of platform and they also have another internal product being developed which brings the total to four new solutions they will be launching in the future. If Semler can replicate the financial success they have currently with these new products then they could have large compounded growth returns for a long time.
Semler Scientific is currently traded on the OTC market causing them to not have the visibility and recognition they should have for their technology and business success. I believe with them expanding their leadership team and board of directors, it’s not too farfetched to see them uplist to the Nasdaq or NYSE in the future. This would grow significant company awareness and they would have way more than just three analysts following their business.
In summary, there are so many growth possibilities for Semler Scientific to take advantage of and continue its success. Their company goals below align with what I want to see the company do and check all of my boxes when it comes to being a business, I want to be a shareholder for decades to come.
**All the information in this deep dive is published in good faith and for general info purposes only. All comments should not be taken as investment advice or consultation just personal opinion. I encourage investors to get personal advice from your professional advisor. I do have a small position in Semler Scientific currently and will be holding this for the long term.
