In a market where technology stocks often command sky-high valuations, Celebrus Technologies (LSE:CLBS) appears to be a genuine anomaly. This AIM-listed software specialist is trading at a valuation that looks almost too cheap for me to ignore, even compared to UK stocks. Let’s take a closer look at it.
Valuation: a deep discount to peers
Celebrus currently trades at an enterprise value-to-EBITDA (EV-to-EBITDA) ratio of just over five times. This is a fraction of the broader sector average, which hovers around 14 times. And this is why I think it’s one of the cheapest stocks I’ve seen. The combination of low price-to-earnings (8.6) and cash — as we discover later — makes it very attractive.
For context, companies in the cybersecurity space also typically trade much higher, with CrowdStrike and Snowflake both with EV-to-EBITDA ratios around or above 100.
Why’s it so cheap? Part of the answer lies in recent trading updates. Celebrus warned that FY25 revenues are expected to dip to $38.6m from $40.9m in FY24, citing delays in customer decision-making amid global uncertainty.
Yet, despite this revenue softness, adjusted pre-tax profits are set to rise thanks to higher-margin software sales and tight cost controls. This suggests the company is actively improving its earnings quality, not just chasing top-line growth.
One upside to the forecast — if correct — is that delayed customer spending this year could turn into additional spending next year. We’ll have to wait and see.
Net cash is king
What really sets Celebrus apart however, is its balance sheet. The company sits on a net cash pile of around $31m (about £24m), with no debt. To put this in perspective, the current market-cap is about £61.3m.
That means cash accounts for roughly 40% of the company’s entire valuation. This is an unusually high figure for a growth-focused tech stock. By 2027, net cash is projected to reach £41m, just £20m shy of the current market-cap.
This cash buffer offers significant protection for shareholders and gives Celebrus the flexibility to invest in growth or weather any further macroeconomic turbulence. Most small-cap tech firms are forced to rely on debt to fund expansion.
Growth and risks
Celebrus’ technology — which enables real-time, granular customer data capture and analysis — is protected by patents until 2034. The company’s shifting from perpetual software licenses to a subscription-based model, which may temporarily slow revenue growth but should drive more predictable, recurring income over time.
However, the broader market for customer data platforms is forecast to grow at nearly 28% annually until 2033, giving Celebrus a substantial runway for expansion.
Despite Celebrus having a clear niche platform, competition’s fierce. What’s more, the company’s exposed to customer spending cycles and as an AIM-listed stock, it may also be overlooked by many institutional investors, which can contribute to its persistent discount.
The bottom line
At 8.6 times forward earnings, and with a debt-free, cash-rich balance sheet, Celebrus could be fundamentally mispriced in its sector. Of course, investors are going to want to see this revenue contract turnaround soon though. If it does, the stock could shoot higher. If it doesn’t, the share price may languish where it is, at around 150p.
I took a leap of faith and added this one to my portfolio recently.
