SoundThinking (SSTI)
An Investment in Public Safety
What Does This Company Do?
SoundThinking makes technology that helps police departments detect and respond to gun violence. Think of it like a security system for entire neighborhoods.
Their main product, ShotSpotter, uses special microphones placed around a city that can automatically detect when guns are fired and tell police exactly where it happened within seconds. This helps police find evidence and victims faster than waiting for someone to call 911.
They also make other software to help police departments manage cases and plan patrols more effectively.
Why This Could Be a Good Investment
The Business Model is Strong
Police departments sign multi-year contracts (usually 3-5 years)
Once a city starts using the system, they almost never cancel (less than 1% historically)
The company gets paid monthly like a subscription service
They have about $93 million in guaranteed future revenue from existing contracts
They Make Good Money
The company is profitable and generates about $20 million in cash each year
They have healthy profit margins of about 20%
They're growing their revenue by about 15% per year
A Big Opportunity is Coming Up
The Chicago Situation: Chicago was one of their major customers, paying about $10 million per year (roughly 10% of total revenue). In 2024, Chicago's mayor (who campaigned against ShotSpotter) canceled the contract for political reasons - not because the technology didn't work.
Here's the interesting part: Chicago recently put out a request for companies to bid on providing gun detection technology again. This suggests they realize they need this type of system after all.
Why This Matters:
If SoundThinking wins back Chicago, their profits could increase by about 40%
The current Chicago mayor is extremely unpopular (only 7% approval rating) and may lose the next election
Crime remains Chicago's biggest concern according to polls
New Growth Opportunity
The company has a newer product called SafePointe that can secretly detect weapons in places like hospitals and casinos without slowing down foot traffic. California recently passed a law requiring all hospitals to have weapon detection by 2027, which could be a huge market for this product.
What Could Go Wrong?
Main Risks
Budget cuts: Cities might cancel contracts to save money during tough economic times
Competition: Other companies are trying to compete, though SoundThinking is currently the leader
Chicago loss: If they don't win back Chicago, growth will be slower
Current Challenges
Puerto Rico (a $2 million customer) is up for contract renewal soon
The company lost some credibility when Chicago canceled, making other cities more cautious
Why Now?
The Stock Looks Cheap
The company is trading at very low valuations compared to other similar technology companies:
Only about 1.5 times their annual recurring revenue (most tech companies trade at 5-10 times)
Generating a 14% cash return for investors each year based on expected cash generation
Management is buying back their own stock, showing confidence
Timing Factors
In late 2025, the Chicago cancellation will be fully "anniversaried" in their financial comparisons, making their growth look much better
They should have a cleaner story to tell investors without the Chicago distraction
Potential acquisition target for larger public safety companies
The Bottom Line
SoundThinking is a profitable company with a strong market position that's temporarily beaten down due to one political cancellation. The business fundamentals remain solid, and there's a reasonable chance they could win back their biggest customer while also growing new product lines.
The investment offers:
Upside scenario: If they win Chicago back, the stock could potentially double or triple
Downside protection: Even without Chicago, it's a cash-generating business trading cheaply that's returning money to shareholders
This thesis hinges on the fact that cities will continue to need gun violence detection technology, and that SoundThinking's proven system will remain the preferred choice despite temporary political setbacks.
Checks
SSTI is Sharia-compliant according to Zoya
Closing price of $11.42 has a 5-star rating on Morningstar
This post is for educational and informational purposes only and does not constitute financial, investment, or other professional advice. All information presented is based on personal opinion and should not be relied upon solely to make any investment decisions. You should always do your own research and consult with a licensed financial advisor, attorney, or other professional before making any financial decisions. Past performance is not indicative of future results.