Fair warning… I didn’t utilize a lot of financial analysis to inform my decision. My research and decision-making was definitely more informal.
So, this is the first near-IPO stock I have bought since TWTR and ADNC. Twitter was good for day-traders, and I held for years and took a loss. Audience Inc was simply a terrible choice (too reliant on being an iPhone vendor, and Apple eventually moved on from them). Since those two, I have been focused on companies that have been on the market for at least a year or two so that I can get a handle on multiple earnings reports. SAIL broke the mold for me. I bought in December at $14/share.
The first thing I researched was ‘identity governance’ because that is SailPoint’s focus. Essentially, this is the process of controlling the flow of identity info (names, addresses, SSN, etc). It includes the flow of info both within an organization and from one organization to another. It seems that there are Sarbanes-Oxley regulations tied to this, as well. I know the current federal administration is attempting to roll back the amount of regulations out there. So, that might be a risk point. However, this business need is currently backed by government regulation that mandates identity governance. Technology is key to maintaining appropriate identity governance and staying compliant with regulations. Bottom line, this is a necessary technology solution for tons of businesses.
Second, I researched the competitive landscape. SailPoint exists solely to provide identity governance solutions. There seems to be a mix of competitor types: companies who focus on this solution, and companies who offer this solution among many other areas of focus. The risk here is that larger companies like Oracle can apply tons of resources to be a major player; however, identity governance is not Oracle’s core competency (you can’t even find it in the main menu of their website). Based on SailPoint’s case studies and client roll, I get the impression that they are a key player in this space.
Their solutions drive recurring revenue from their clients, which is something that is a plus in my eyes. I do not have an understanding of SailPoint’s moat yet (if they have one), and am still trying to determine that.
Like I said at the beginning of this, my reasoning is light on financial analysis. I simply feel that they have a long, diverse list of clients who are proving that SailPoint has staying power. Combine that with the fact that this technology is required for so many companies, and I decided to pull the trigger. Their first public quarterly earnings release on Wednesday made me feel more confident in this stock pick. I hope to hold for a long time.
Some things that I learned from their earnings release:
•YoY revenue up 41% for 2017 vs 2016, and up 53% when comparing Q4 YoY
•933 total clients
•2017 revenue was $186.1M
•The revenue and client numbers mean that the average annual revenue per client is around $200K.