Ondo InsurTech PLC (LSE:ONDO) is emerging as a leader in the home water leak detection market, with a patented technology that has shown significant promise in reducing the cost and frequency of leaks, according to Bloom Analytic.
The research house said the innovative LeakBot device was shown to reduce water damage claims costs by 70% (based on a case study of 3,000 homes), with a 39% reduction in the frequency of claims.
The business model of Ondo is highly scalable, targeting global home insurance companies with millions of customers, Bloom said.
Its recent deal with Länsförsäkringar of Sweden, potentially worth £30 million over five years, demonstrates the major scalability of the business, it added.
Ondo's growth is further supported by its environmental commitment, as evidenced by receiving the London Stock Exchange's Green Economy Mark in July 2022. This accolade enhances the company's reputation and aligns it with regulatory and market trends, Bloom's research pointed out.
The company's revenue model is attractive, generating income from both unit sales and ongoing servicing, it added. With pricing varying by geography and partner, Ondo's long-term operating margin is estimated to be in the 40-50% range. The company's strategy in America to offer a $5/month bundled fee, including purchase and service, is indicative of its adaptability.
The company's shares have risen over 300% from their lows to trade currently at 37p.
"A key long-term catalyst for Ondo shares is likely to be how the market will value incremental unit sales and customer contracts," said Bloom.
The research note concluded: "Our model suggests potential for at least a 10x in revenue over the coming five years, generated from the company’s existing customers alone and assuming no benefit from new customer acquisition.
"A transition to cash flow positive in the coming three years, which we think could drive a multiple rerating for the shares."