Microstrategy.

Humm. The sound of the working server components engulfs you as you enter one of your company’s server rooms. Your company recently invested into a new software package, made especially to analyse data. Over time, it has made your company’s computers much more helpful. That company name is Microstrategy, the largest corporate holder of Bitcoin in the whole wide world. But is it still a software company, or a lousy hype stock, boosted purely by meme stock craziness? Let’s find out! :)

Info from this article will be used in https://substack.com/@flyerwealthmanagement substack! If you want to collab, just let me know - I’m open :)

Stock Information

Many people just connect Microtrategy with Bitcoin, but do they also know about their business intelligence software, which helps businesses to understand their data using AI - a powerful tool for understanding your customers, sales trends, and overall company performance. Its customers are Visa, Amica and others.

In terms of their market share, here’ a chart (made using my tool):

Its market share is so small, you can barely even see it. Between the two blue sections.

I’m not happy about that. What would Willy Wonka say?

Next up, let’s look at the efficiency of the company (how much cash invested yields good returns):

VSO financial efficiency chart (also made using my tool):

This company is just tragic compared to other ones (the red squares show us the values below the median metric). I guess better companies are ADBE, FICO, ADSK and CDNS?

Alright, now let’s move on to the profit margins, as the higher they are, the better.

The net profit margins are on the minus side, indicating the unprofitable nature of their business, which I must say, is a terrible sight. The green ones are the net margins, the yellow ones are the opearting ones and the blue one is the gross one.

This is yet another feature I’m working on - a breakdown of all their revenues exactly, so you see what the company earns - visually!

Financial Health

The financial health cubes, which you are going to see in a moment are made out of 125 blocks, each cube being proportionally divided, and some hidden, so that it reflects the real proportions between the values, red mean negative values, and green positive.

We can clearly see their net equity being on the posistive side, which is a small green light of hope in the giant sea of red bad debt, which has totally engulfed their cash position by now.

Their debt to EBITDA (how fast they would pay off their debt from their earnings before interest, taxes, debt and amortisation) has reached a level of -4.78, which is useless in deciding, how much of a debt burden they have.

Instead, we can use the Debt / Equity ratio, to measure the amount of debt relative to the amount of cash the business owns.

Imagine you own a fruit stand, on which you sell delicious apples and strawberries. You have bought $100 worth of apples and strawberries to sell. That is your EQUITY. It’s what you own in the business.

Next, you want to expand, as you have seen more people bought your cool-packaged strawberries, than at the local supermarket. Your helpful friend offers you a 50$ loan, for you to buy more strawberries. You happily take it, and it turn, create DEBT for your business. It’s what you owe to other people.

Debt / Equity = $50 (debt) / $100 (equity) = 0.5

That means for every $1 you owned, you borrowed $0.50.

The lower the Debt / Equity is, the better it is for the business.

Ok, the Debt / Equity for MicroStrategy is at 1.13, which means that for every $100, they borrowed $113, which is just scary, considering the losses the company is making at the moment.

If you have any ideas on how to show complicated stock metrics easily, let me know, and I’ll try to create it! :]

Alright, let’s move on!

Revenue growth

MSTR revenue has been trending in the wrong direction for quite some time now. They haven’t been profitable, except for two times. Those are red flags you should watch out for. Don’t invest just because everyone is doing it, and that they are buying Bitcoin. Numbers don’t lie.

Terrible just terrible.

Another great example of that can be Pfizer:

Johnson & Johnson vs Pfizer.

Dividends & Buybacks

MSTR, just like any other software company at the beginning of its history, is actively diluting its shareholders, by issuing more shares:

Buyback Yield is -35.64%.

No dividends, of course, and no sign of them anytime soon.

Valuation

Simplywall.st:

Mine (made using the tool I programmed):

Keep in mind that those are only estimates, and I have used the 7% revenue growth for the DCF valuation. I might have made a mistake. :)

Conclusion

A company that makes a huge impact in the media by advertsing their support for Bitcoin, but with no real cashflows, is destined to fail, apart from their Bitcoins, of course. But I wouldn’t bet on any crypto at all. It’s all worth 0, as it’s not producing ANY cash. Stocks are, but that’s for another story…

Right now, I would consider this company a hold. If you own, don’t sell, and if you don’t own, don’t buy, as it’s just not worth it anymore. Upon doing my due diligence, I can say with no regret, that I will never buy this overvalued company, whose fincnail metrics show a company heading for its demise.

This isn’t financial advice.