GlobalSCAPE Inc and Why SaaS Kicks Ass

I’ve been looking at several SaaS (software-as-a-service) companies as of late. In laymen’s terms, SaaS is software that is hosted by the providing company and the customer pays a regular subscription fee to use it (as opposed to purchasing the software up front for a one-time fee and hosting the software themselves). If you were to write down a list of characteristics you seek in investments, I bet the typical SaaS company checks off most items on your list. GlobalSCAPE Inc (GSB, $4.10) is one such company that possesses the following:

  1. 95% gross margins
  2. Free cash flow margins around 15%
  3. Over 100% returns on capital
  4. Over 50% of revenue is recurring
  5. Good visibility into future revenue
  6. Little to no customer concentration (no one over 10% of revenues)

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