Another great write-up from you, thanks for sharing. Normally we see a business getting more profitable on every unit of extra revenue (operating leverage) but here it is reversed. I think growth is real but we don't really know how far margins fall which makes me question the economic moat. Would be curious to here your view as you're far deeper into it.
Thanks mate! Appreciate the comment and compliment.
Growth is not just real, it’s very very fast haha.
I wouldn’t worry too much about an economic moat, they’re doing just fine there.
The very nature of businesses like DLO is that their take rate will fall. That’s just how they scale. I think the problem some investors now see is that it’s falling fast than they’d like.
In the end you want profit to grow alongside overall growth. That’s not the case right now.
But I think eventually it will catch up. This is a very capital-light business that has all the means to continue scaling well.
Thanks for your insight! You're right, growth is fast but from an investors perspective we want to see the growth translating into durable cash flows. Durability may be the question but assuming you are right, there is huge upside because gains are made when expectations or fear and fundamental reality drift apart. So you're saying its an investment for the opportunity seeking investor not for the risk avoidant one, I guess :)
Another great write-up from you, thanks for sharing. Normally we see a business getting more profitable on every unit of extra revenue (operating leverage) but here it is reversed. I think growth is real but we don't really know how far margins fall which makes me question the economic moat. Would be curious to here your view as you're far deeper into it.
Thanks mate! Appreciate the comment and compliment.
Growth is not just real, it’s very very fast haha.
I wouldn’t worry too much about an economic moat, they’re doing just fine there.
The very nature of businesses like DLO is that their take rate will fall. That’s just how they scale. I think the problem some investors now see is that it’s falling fast than they’d like.
In the end you want profit to grow alongside overall growth. That’s not the case right now.
But I think eventually it will catch up. This is a very capital-light business that has all the means to continue scaling well.
Thanks for your insight! You're right, growth is fast but from an investors perspective we want to see the growth translating into durable cash flows. Durability may be the question but assuming you are right, there is huge upside because gains are made when expectations or fear and fundamental reality drift apart. So you're saying its an investment for the opportunity seeking investor not for the risk avoidant one, I guess :)