Japanese Data Platform Company (Unknown)

I wouldn’t consider myself a SaaS expert, or an expert on AI disruption. But I think I have found a case where Japanese investors have thrown a company into the “sell SaaS because of AI” bucket, even though AI is actually a big positive.

In fact, I wouldn’t really call it SaaS at all. It’s a data platform. Customers pay a subscription to access a proprietary database built from primary data. In this case, AI isn’t a threat—it’s a way to extract more value from that data. And that’s exactly what management has recently made its core focus.

More importantly, in last week’s earnings release the company announced its first price increase for existing customers in its 25-year history. The hike is meaningful and, as you’d expect, should flow entirely to margins. In most environments, that kind of news would be rewarded with a 10% or 15% post-earnings pop. Here, the stock was up less than 3%.

In the research below, I explain why I see AI as a tailwind to the company’s value proposition, what I think the price increase will mean for the financials, and why I believe it could be trading at roughly 3.9x to 4.6x EV/EBIT two years out.

Even if I’ve overestimated the pricing impact and underestimated churn, the stock is still trading at about 6.2x LTM EV/EBIT. And this is based on earnings generated in what is likely the worst end-market environment since the GFC. That’s for a business that has compounded EBIT at 18.3% over the past 20 years, 17.6% over the past 10, and delivered an average ROE of 27%.

I don’t think many are paying attention to this. The only reason I noticed it is because I’ve been following the company for some time.