r/investing Apr 26, 04:40 PM
ReposiTrak (TRAK) -- a $140M micro-cap I've been researching. Here's my analysis. I spent a few weeks going through the filings of ReposiTrak (TRAK), a micro-cap SaaS company out of Utah. $140M market cap, nobody really covers it. Wanted to share what I found because I think the valuation is interesting relative to the quality of the business.
The business
TRAK makes the software that grocery retailers use to trace food products back through the supply chain. When there's an E. coli recall on romaine lettuce, someone has to figure out which farm, which lot, which truck. That's what TRAK does. No hardware, just software.
What caught my attention is their error-correction system. They have 500+ algorithms that clean up bad supplier data before it enters the system. They've patented 9 of them. Most competitors just pass data through without checking it, which means garbage in, garbage out. TRAK actually fixes the data.
The regulatory angle
The FDA's FSMA Rule 204 requires end-to-end food traceability. It's been delayed twice now (enforcement pushed to 2028), which I'll admit makes me a bit nervous. But the thing is, the big retailers aren't waiting for the FDA. Walmart and Kroger are already mandating their suppliers get on compliant platforms. When a retailer tells 10,000 suppliers "use this or we drop you," those suppliers sign up. That's where the network effect comes from.
Once a retailer's supply chain is on TRAK, switching is painful. Every supplier would have to migrate. So revenue tends to stick.
The financials
I calculated owner earnings instead of using reported EPS because I want to know the actual cash this business generates for owners:
Operating Cash Flow $6.87M
Less: Stock-Based Comp -$0.46M
Working Capital add-back +$2.76M
Less: Maintenance CapEx (5yr avg) -$0.30M
Owner Earnings $8.87M
Per share (18.28M diluted) $0.49
Some other numbers worth noting: ROIC is 14.78%, the five year OE growth rate is about 31% annually, revenue is ~99% recurring, and they have $28.31M in cash against $0.40M in debt. Management bought back $4.35M in stock over the last twelve months.
Valuation
At $7.55/share, the market is putting a 12.37x multiple on owner earnings. For context, I think something closer to 20x is reasonable given the recurring revenue, high ROIC, and regulatory tailwind. That would put intrinsic value around $11.35 ($0.49 x 20 + $1.55 net cash per share), which implies about a 33% margin of safety at current prices.
I could be wrong about the multiple. If you think 15x is more appropriate, IV comes out to $8.90, still above the current price but not by much.
What worries me
A few things keep me honest here:
The CEO compensation structure is unusual. Randy Fields takes $1.8M through a management company called Fields Management Inc. That's roughly 25% of net income, which is heavy for a company this size. On the other hand, he owns 21% of the shares, takes zero stock-based comp (no dilution), and is actively buying back stock. Mixed bag.
A cybersecurity breach would be real