What multiple would you pay for a business with the following EBITDA profile?

To help you out a bit, allow me to include a couple more details:

• The company is in an internet-related field (some advertising, some subscription revenue)
• Their EBITDA growth has been generated with just a bit of net debt ($800m) and ~0 equity issuance
• Capex requirements are fairly low - about $40-50m per year (ie, EBITDA converts to FCF pretty well)

Today's post is on Verint Systems (VRNT), a software company started under Comverse Technology in the 1990s and IPO'd in 2002.

I decided to take a look at this company because it's in the software business -- an industry I like -- and it was trading near a 3-year low price. We find that screening for this level of negative sentiment provides good hunting ground for stocks that are affected by cognitive biases. For more background on our cognitive bias framework for finding undervalued stocks, see here.

The financials

Here's a look at their numbers over the last few years:

​What is clear at a glance is that this company is not exactly a rocket ship: sales appear to be growing at a mid-single digit rate in recent years and are nearly flat since 2015. Adjusted EBITDA margins are flat at around 20%, lower than many software companies. Shares outstanding are up more than 50% since 2013, probably evidence of the company's looseness with share issuance for acquisitions and employee compensation.