Windward (LSE: WNWD) is an attention-grabbing progress firm. It has a market cap of £85m and a share price of 96p, making it a penny inventory. Nevertheless, it has fast-growing revenues and is on the cusp of profitability.

Furthermore, it’s harnessing the revolutionary energy of synthetic intelligence (AI) expertise in its merchandise. Right here’s why I’m invested and stay bullish.

Wind-what?

Windward is a software program agency that makes use of AI to trace ships and analyse information. Its platform is powered by machine studying fashions that utilise billions of information factors to assist corporations and organisations perceive dangers, optimise routes, and guarantee environment friendly transportation of products by sea.

Whereas the inventory is up 75% over the previous yr, it’s nonetheless down 52% since itemizing in late 2021.

What I like right here is that the agency’s marine monitoring expertise is in excessive demand (and prone to stay so) because of the rising variety of sanctions positioned on regimes and vessels. Additionally, there’s ongoing chaos within the Purple Sea the place pirates — keep in mind them? — have been making a comeback.

Listed here are some companies and organisations that want to trace ocean freight, particularly with rising dangers on the excessive seas:

• Transport corporations observe fleets and optimise routes for security and effectivity
• Cargo house owners and freight forwarders observe shipments in actual time to make sure well timed supply
• Insurers can use Windward’s information to evaluate maritime threat and set applicable insurance coverage premiums
• Authorities businesses monitor suspicious exercise and guarantee regulatory compliance

Massive-name prospects

The corporate has a rising blue-chip buyer base that features BP, Shell, and HSBC. Its non-executive chairman is Lord John Browne, former CEO of BP.

It additionally has a contract with the US Division of Homeland Safety. And in February, the agency was chosen by INTERPOL, the world’s largest worldwide police organisation.

Blue-chip names like this give credibility to the agency’s platform. Simply as importantly, it presents the chance to promote extra modules and companies to those well-financed prospects over time.

Charting a course to profitability

The corporate’s software-as-a-service (SaaS) mannequin, involving annual subscription for purchasers, signifies that almost all its income is recurring.

By the top of 2023, its annual contract worth had elevated 35% yr on yr to $34.5m. Income rose 31% to $28.3m whereas gross margin expanded from 72% to 79%.

The principle threat is that the enterprise continues to be loss-making. Final yr’s EBITDA loss was $5m, down from $12.1m in 2022. Nevertheless, it’s price highlighting that the loss narrowed to only $1.2m in H2 of final yr.

This implies that the agency is effectively on the right track to succeed in EBITDA break-even this yr, with income prone to observe given its excessive gross margins and low capital necessities.

It ended 2023 with web money of $17.3m.

Greater price ahoy?

The Metropolis at present sees income rising to $35.1m this yr then $41.2m in 2025. So progress appears good and robust right here, if forecasts are right.

As a small agency, Windward solely has three analyst groups masking it. However all of them have a ‘strong buy’ ranking on the inventory and a consensus one-year price goal of 143p. Although only a goal and never assured, it’s nonetheless 49% increased than immediately’s price.

Lastly, the up-and-coming inventory is buying and selling at 3.8 instances gross sales, so doesn’t seem overvalued to me. I’d think about shopping for shares with spare money in July.