Is now the time to buy iSignthis [ASX: ISX]?

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I couldn’t believe what I saw this morning.

In fact, I almost fell off my chair. I’ll get to that really soon, but first let’s chat about iSignthis.

You saw the news, right? iSignthis LTD [ASX: ISX] announced an annualised GPTV (Gross Processed Turnover Volume) of more than $1.1 billion. This came out on 9 September 2019.

Plainly put, transactions within the EU and Aussie networks are up to 160% from 30 June.

If you’re not sure what iSignthis does, hang in there. Because after seemingly positive news, the share tanked 49.24% from its high. In just two days!

Here’s a quick rundown on the company…

Who is iSignthis?

iSignthis is a dual-listed company in Frankfurt and Australia.

The company provides a remote identity verification and payment authentication service.

The concept behind this company is to be a one stop shop. They want to handle all payment, identity and eMoney needs.

Think of Paypal, but much, much smaller.

The company isn’t new. In fact, they listed on the ASX back in 2015.

From around March 2019, the company began to gain traction with investors. Euphoric buying behaviour began to drive the price of the company higher.

Today (or maybe a few days ago?), investors value the company extraordinarily high. The share price run from March saw investors value the company at over $1 billion at the share price peak.

That seemed crazy, so I did some digging around on this…

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A company announcement in June may have sparked the euphoric buying behaviour. That’s because in June, the company reported that it was now cash flow positive. Punters buying in March at the start of the run perhaps anticipated this.

Investors tend to reward small companies with potentially big market opportunities when they move into cash flow positive positions. It suggests the company is now self-sustaining, and that it doesn’t require more capital from shareholders.

This news was icing on the cake for investors after a slew of updates ISX issued throughout the year. Some which included the progression of the companies ISXPay service.

ISXPay is the merchant side of the business. It allows companies to accept payments from their customers through online portals. Much like shopping online. Again, think Paypal here.

But positive news doesn’t always lead to growth in the share price. This is evident in iSignthis right now.

In fact, the second piece of news, which an average investor may have drooled at, was ISX’s inclusion into the ASX 300. This goes into effect on 23 September 2019.

Typically speaking, this would create excellent opportunities for early investors. What I mean is fund managers who are able to invest out to the top 300 are now able to pile into iSignthis.

This can usually force the shares price higher as more buyers outpace the sellers. This is just the law of supply and demand.

So the current pullback in iSignthis might be the perfect setup for savvy investors to buy in. Though, as you may know, I want the technicals to guide me. I’m not a fan of buying a falling knife.

So for now, I’d be sitting on the sidelines watching which direction investors push the company. This can be seen by looking at the company chart…

But what about current holders?

Well, this is the exact behaviour which tends to send shivers down my spine.

Let me explain…

The buy and hold investor

I may head onto a bit of a tangent here. So, bear with me.

But one thing I like to do is join forums to get a feel for the market on any specific day.

After all, trading is not a zero-sum game. We’re in it for the money, though we are competing against every single other person out there. All with conflicting or opposing views.

You’ve heard the adage; one man’s trash is another man’s treasure. It’s true in the share market.

Well, I found this conversation nestled inside a Facebook group.

It’s amazing what you can find there sometimes.

A screenshot of a cell phone Description automatically generated

Source: Facebook

What I want to draw your attention to is the comment an ‘investor’ made. Patterson’s has a $2.07 price target on it.

By ‘on it’, this person is referring to iSignthis.

Right now, ISX has fallen around 50% in price. It has a market cap of around $1 billion. Who knows when the top commenter bought in? But what I’m essentially reading here from the second commenter, is that: don’t worry about the price drop, it’s going to the moon!

This worries me…a lot!

It speaks largely on the average punter’s ability to think for themselves.

We’re only human, we tend to make mistakes. But these thoughts shouldn’t occur when we’re dealing with money.

It should be based purely on probability, along with risk to reward.

So, the moral to my message here is, be a free thinker and make your own judgements. I tend to use technical analysis and couple it with basic fundamental analysis.

For others, they may choose to go purely fundamentals. You decide what works for you.

Follow the money, but always trade with the end in mind. And no, the end cannot be some fictitious gain like 10x’ing your money on every single investment.

This is not a recommendation to buy or sell ISX. It is an update only. I hope you found it useful.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

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