We came across a bullish thesis on P10 Inc (PX) on ValueInvestorsClub by TallGuy. In this article we will summarize the bulls’ thesis on PX. P10 shares were trading at $7.65 when this thesis was published, vs. yesterday’s closing price of $9.78.
A young entrepreneur pitching their venture capital investment idea to a board of directors.
P10 Holdings is an alternative asset manager that facilitates client access to private markets, charging fees on committed capital over extended periods. Recent challenges, including a mix shift in strategies, CEO transition, and growing working capital, have led to shrinking cash margins and a devaluation of its stock, presenting a buying opportunity. P10’s new CEO, Luke Sarsfield, has been incentivized with a stock grant based on achieving various VWAP hurdles, motivating him to grow Fee Paying Assets Under Management (FPAUM) and improve margins.
P10 is expected to return to double-digit organic FPAUM growth, leveraging Sarsfield’s expertise and strategic direction. Despite guiding to only 4% net growth in FPAUM for 2024, below peers, the long-term outlook remains positive. Margins, which have declined due to rising compensation costs and a shift towards lower-margin direct strategies, are anticipated to recover as these investments bear fruit. The firm has guided 2024 adjusted EBITDA margins to mid-40s but aims to exceed 55% in the future.
P10’s valuation is currently low, offering a significant margin of safety. It plans to enhance shareholder value through M&A, stock repurchases, and strategic growth investments. However, risks include potential impacts from higher interest rates on private equity, declining PE allocations, and competition for talent affecting margins. Additionally, a significant receivable from its subsidiary, ECG, could be accretive if collected.
Overall, P10’s new leadership, strategic investments, and potential for margin expansion provide a compelling case for future growth and stock re-rating, despite current market skepticism. The firm’s alignment of management incentives with shareholder interests further supports this optimistic outlook.
PX is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held PX at the end of the first quarter which was 17 in the previous quarter. While we acknowledge the potential of PX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as PX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
