CoverAll Technologies (COVR)

[rrat02]

#6: Potential Upside & Downside Risk

Never a guaranteed outcome but I would argue that COVR offers the possibility of a huge upside gain with minimal downside risk. Listed below are a few (of many) possible scenarios. I will not give a probability of any one scenario occurring because it would merely be a guess.

SCENARIO #1: MULTI-BAGGER

- the majority of the current customers sign 5 yr. upgrade/renewal contracts

- new customers (5 yr. contracts) are added at a slow but steady pace


SCENARIO #2: HUGE % RETURN (at least a double)

- at least 1/2 of the current customers sign 5 yr. upgrade/renewal contracts

- occasionally add a new customer (5 yr. contract)


SCENARIO #3: 50-100% RETURN (or more)

- company is acquired by a larger player


SCENARIO #4: TREADING WATER

- # of renewals/upgrades is disappointing

- struggle to sign new customers

Going forward in the event Scenario #4 takes place my question would be, "considering that they already have signed 9 customers how much lower can the valuation be?"

From an investment standpoint what makes this situation so attractive/interesting is that a great deal of the downside risk no longer exists. The risk was greatest when they had zero contracts for the new system/products.

Also the performance 'bar' for a really nice upside gain is not all that high/difficult to meet.