BigBear.ai: All Bark, No Bite

Richard Durant9.37K FollowersFollow5ShareSavePlay(14min)CommentsSummaryDespite seemingly being positioned to benefit from the AI boom, BigBear's business has struggled in recent years.This likely stems from the fact that BigBear is reliant on low-margin services for government customers.There is hope that recent acquisitions, like Ask Sage and Pangiam, could improve the company's trajectory. These companies are operating in competitive markets, though, and appear to lack differentiation.BigBear has the revenue multiple of a high-growth SaaS company, despite the fact that it is a low-growth and low-margin services company. BT Series/iStock via Getty Images BigBear.ai's (BBAI) stock has performed well over the past 12 months, although a cursory glance under the hood indicates that there is little reason for optimism. Despite management efforts to introduce higher value add solutions, the business still appears to beThis article was written byRichard Durant9.37K FollowersFollowRichard Durant is the leader of Narweena, an asset manager focused on finding market dislocations that are the result of a poor understanding of a businesses long-term prospects. Narweena believes that excess risk adjusted returns can be achieved by identifying businesses with secular growth opportunities in markets with barriers to entry. Narweena’s research process is focused on company and industry fundamentals with the goal of uncovering unique insights. Narweena has a high risk appetite and a long-term horizon, in pursuit of stocks that are deeply undervalued. Coverage tilts towards smaller cap stocks and markets where competitive advantages are not obvious.Investments are driven by a belief that an aging population with low population growth and stagnating productivity growth will create a different opportunity set to what has worked in the past. Many industries are likely to face stagnation or secular decline, which counter-intuitively may improve business performance if competition decreases. Conversely, other businesses are likely to face rising costs and diseconomies of scale. In addition, economies are becoming increasingly dominated by asset light businesses, and the need for infrastructure investments is declining over time. As a result, a large pool of capital is chasing a limited set of investment opportunities, which is driving up asset prices and compressing risk premia over time.Durant has undergraduate degrees in engineering and finance from the University of Adelaide (Honors) and an MBA from Nanyang Technological University (Dean’s Honors List). He has also passed the CFA exams.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Recommended For You