LogMeIn: Log Me Out!

2/17/17

Shares of LogMeIn Inc (NASDAQ:LOGM) are up about 98% over the past 12 months and in this article I'm going to suggest reasons why it makes sense for current shareholders to sell and other investors to avoid the stock at these levels.

There are a few reasons for this. There's a very weak correlation between revenue and net income, which prompts the question: if rising revenues can't generate the source of sustainable shareholder returns, what can? In addition, the stock is morbidly overpriced. I'll be modeling the assumptions built into price, and forecast what has to happen to bring this company to a point where it's simply twice the value of the overall market.

For those who don't want to get into the weeds, I'll jump right to the end. Holding all else constant, in order for LogMeIn to become simply "badly overpriced," it would need to grow revenues about nine fold (that 900%!). Smart acquisitions aside, this would be a miraculous result, and I don't recommend relying on miracles as a sound investment strategy.

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