Yesterday, I wrote an article looking at how investors may be able to find companies largely unaffected by recent global events, trading at bargain prices, due to investor flows out of smaller companies.
It may be surprising to see a few software companies on the list of cheap companies. However, recent concerns about the impact of AI, together with general market weakness for smaller companies, mean that several appear too cheap to ignore. Having never looked at dotDigital before, I was keen to see if it lives up to the initial promise of a high-quality, cheap and growing business. What better way to take an initial look than writing it up as one of our new shorter Stock Pitches.
Disclosure: At the time of publication, I have no position in dotDigital.
The Pitch
dotDigital (LON:DOTD) is an AIM-listed marketing automation SaaS platform founded in 1999, providing AI-powered customer experience solutions to 4,000+ brands across 150 countries. With a £140m market cap, this is a small but not insignificant business. The StockRank is unimpressive, being let down by an average Value Rank and a declining Momentum Rank:
However, the company has a strong growth track record, delivering a 12% CAGR in revenue over the last 5 years. 2026H1 showed contracted ARR up 13% to £75.4m (+6% organic) with recurring revenue at 84% of the total.
The company says it is trading in line with expectations, which would put its forward P/E at just 9 based on the current broker consensus. This seems low for a company with high recurring revenue, an excellent growth track record and strong cash generation.
The Big Picture
dotDigital stands out for several reasons:
- Quality SaaS Metrics: Recurring revenue at 84% of the total provides good forward visibility. 2026H1 average revenue per customer increased 7% to £1,968 per month.
- Earnings-Enhancing Acquisitions: The acquisition of Social Snowball in June 2025 brought 1,500+ Shopify customers and $5m+ in run-rate revenue. The platform achieved 200% revenue growth to $3m in 2024 and became cash flow positive in H1 2025. ARR was up 30% annualised since completion, with significant cross-sell opportunities. US-based SaaS platform Alia was acquired this month, adding another $8m in ARR. Again, this acquisition creates additional opportunities for retention, cross‑sell and upsell across the Group's customer base.
- Blue-Chip Customers: FY2025 wins…
