YB new stock pitches (Fri, Nov 14)

Natural Gas Services Group (NGS) delivered a beat and raise for 2025 guidance while increasing its newly-established dividend by 10%, addressing key downside concerns and building credibility for its bull case. The company mitigated customer concentration risk as Devon Energy now represents over 10% of year-to-date revenue, reducing dependence on Occidental, while sub-$60 oil demand fears have not materialized despite previous warnings. Management continues building credibility around product differentiation through uptime and data analytics, with customers increasingly recognizing this competitive advantage, and the company received approval for an $11.5 million tax refund. Trading at a $350 million market cap representing 6x the ~$90 million quarterly EBITDA run-rate minus debt, the stock appears fairly valued but toward the low end, with potential catalysts including market share gains, validated product differentiation, and incremental demand from data center pipelines and LNG. The bull case envisions 8x $125 million EBITDA with $300 million debt potentially doubling the stock within a few years, while substantial medium-term compression demand from data centers and LNG could drive valuations to 9x $175 million EBITDA with $400 million debt in five years, representing more than a triple return.

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CareCloud (CCLD), a healthcare IT company trading at 7x EV/EBITDA on $27 million EBITDA guidance with 23% margins, offers revenue cycle management and healthcare software solutions primarily to clinics and medical practices. The company's core Healthcare IT segment grew 10% with 16.4% operating margins, while the lower-margin Medical Practice Management segment represents 12% of revenue. CareCloud simplified its capital structure by converting Series A preferred stock to common stock, eliminating $15 million in annual dividends, and plans to catch up on Series B preferred dividends through double payments starting January 2026. The recent $16.5 million Medsphere acquisition expands the company into the hospital market, contributing $3.4 million in quarterly revenue immediately post-acquisition. Operating in the $65 billion RCM market growing 11% annually, the company increased 2025 revenue guidance to $117-119 million (8% growth) and resumed acquisitions after years of constraint. Key risks include acquisition-dependent growth, complex healthcare regulations, integration challenges, and high personnel costs for skilled technical staff. The stock trades cheaply due to lingering distrust from its complex preferred stock history, post-COVID revenue normalization after 95% growth from 2019-2021, and limited market coverage as a small-cap company. At a fair value multiple of 10-12x EV/EBITDA, the stock offers 40-70% upside potential.

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4C Group AB (4C.ST) is an owner-operated (30% insider ownership) NATO-cleared defense training software leader trading at a €35 million market cap, with its Exonaut software used by military forces for training and evaluation across 70-80% NATO countries. The company's order book has doubled from 130 million SEK in 2024 to around 300 million SEK in 2025, driven by record contracts including a 295 million SEK US award and 275 million SEK UK contract, with potential additional orders from three NATO countries currently conducting successful field tests and Australia expected to announce positive news within months. 4C is exiting its resilience business to focus entirely on defense, which will save 40 million SEK in costs and add approximately 8 percentage points to EBIT margins starting in 2026, with management targeting 20%+ EBIT margins medium-term. The company has 250 million SEK in contract assets and a 25 million SEK short-term bank facility, with management stating no financing issues expected, particularly after seasonal Q4 conversion. Trading at 1.3x EV/Sales compared to software peers at 20-30x multiples, the stock faces pessimistic market sentiment despite having a rare moat with NATO secret clearance, high switching costs, and 80% gross margins on software sales. With projected 2026 revenues of 430-450 million SEK at 15% EBIT margins yielding around 60 million SEK EBIT, applying peer multiples of 20-30x EV/EBIT suggests a price target of 30-50 SEK per share, representing significant upside from current distressed valuation that appears to price in bankruptcy despite strong fundamentals and operational leverage from scaling orders.

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