Gear4music Holdings (LON:G4M) and Focusrite (LON:TUNE) both provide music products and software online. Both also score well in terms of quality and momentum (G4M with a QM Rank of 87, TUNE with 98), and both also have their own founders still as top shareholders (see G4M here and TUNE here)
That is where a lot of the similarities end, however. Dig a little deeper and we have two quite different businesses in terms of established quality and profitability.
I last wrote about G4M on the 6th of April and noted that its prospects might be improving. Since then, shares are up by about 42.5% to 288p. In fact, its shares have nearly doubled since March 18th. The company has struggled to make profits in the past but some are clearly anticipating this will change. It is “cheap”, with a price to sales ratio of less than 0.5x.
Focusrite, on the other hand, has been very profitable for many years now. It has been a great success for shareholders. It has a superlative track record of high returns on capital and free cash flow. It is “expensive”, with a price to sales ratio of nearly 4x.
Both…
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