Editor’s Note (23/01/15): This article, originally posted on 14 January, has been amended to remove what we felt was ambiguous and unclear wording surrounding Globo’s history of cash generation. The Fool apologises for this error, and the author has revised his wording of the article.
This morning Globo (LSE: GBO) announced that one of its existing customers, an undisclosed US Fortune 100 company, has submitted a purchase order to continue a contract worth $1.2m on an annual, renewable basis.
The order was for 50,000 licences for Globo’s GO! Enterprise software, which allows employees to use personal mobile devices to connect to the company network through a specifically designed browser in a safe and secure manner.
CEO Costis Papadimitrakopoulos was encouraged by the repeat business, stating:
“We are delighted to receive this purchase order which we believe represents one of the largest BYOD implementations, in terms of number of devices, worldwide and confirms Globo’s traction in its key US market.“
Shares remained largely unmoved in early trading, likely because the market expects renewals from the majority of Globo’s customers.
The market has been cautious about Globo ever since infamous city investor Simon Cawkwell, nicknamed “profit of the plunge” and often referred to as Evil Knieval, shorted the stock after pointing out that soaring profits had not translated into the same levels of cash flow.
A quick look at the last four years of Globo’s annual reports show that a significant portion of Globo’s historical reported profits failed to translate into free cash flow in those years.
This, along with a series of dilutive share issuances, has left investors feeling sceptical toward Globo in the past — and the shares have lost around 50% of their value since peaking in 2013:
In my view, cash truly is king — and I generally prefer to invest in companies with a long track record of strong cash conversion. It is also why The Motley Fool likes proven, dividend paying companies – there is no substitute for hard cash in investors’ pockets.
