HUGE thanks to hlygrail who posted a table here which I will steal: https://discussion.fool.com/elastic-estc-ipo-research-and-discus… Haven’t seen you post here in a couple months, hlygrail, but I hope you’re doing well! I have added a column for the Quarter ending October 2018, and some rows. I’ve also added a table for valuation metrics, which I think are worth looking at for any company, especially ESTC since its valuation is so far from the norm.
Company progress metrics
7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18
Calculated Billings 33.6 51.3 59.2 88.5
Revenue $16,572 21,305 23,128 27,172 31,644 37,038 41,681 49,572 56,644 63,575
(QoQ change%) 28.6% 8.6% 17.5% 16.5% 17.0% 12.5% 18.9% 14.3% 12.2%
(YoY change%) 90.9% 73.8% 80.2% 82.4% 79.0% **71.6%**
Gross Profit 12,629 16,915 17,948 20,840 24,230 28,078 30,915 35,972 41,087 44,988
OpEx 20,924 23,673 39,591 31,316 33,404 35,204 43,374 55,207 59,502 72,058
(YoY change%) **104.7%**
Operating Loss (8,295) (6,758) (21,643) (10,476) (9,174) (7,126) (12,459) (19,235) (18,415) (27,070)
Stock-Based Comp 1,098 1,195 15,087 1,506 2,254 2,770 3,554 4,164 5,665 **11,239**
Customer Count 5,500 6,300
Cust w ACV > 100k 300 340
The numbers in bold are numbers I didn’t really love from the Q. I especially hate to see operating costs rising faster than revenue or gross profit. I’m sure the company is investing for continued growth, but this imbalance is just an ugly look in my opinion.
Valuation metrics
1/15/2019
Shares Outstanding (fully diluted, in mil) 87.5
Shares Outstanding (ordinary, in mil) 70.9
Share price as of this post 73.68
Cash (in mil) as of this post 318.6
EV/S (fully diluted) as of this post **28.9**
EV/S (ordinary) as of this post 23.1
Very instructive, in my opinion, to look at both the ordinary and fully diluted share count. In this company’s case, it’s a 23% increase in the share count if you look at fully diluted – the valuation is more than a billion dollars higher than it is at the ordinary share count!. The range of EV/S ratios (mid to high 20’s) makes me want to tread very cautiously with this stock. It’s going to be difficult for shares to appreciate significantly with a valuation that’s already this high and with a lot of dilution potentially coming down the pike.
Conclusion
This company is doing great. It’s impossible to argue with 72% revenue growth, but the valuation is stretched thin, more so than any other stock I follow (though ZS is close). Barring a buy-out, I predict the share price will settle into a range for several quarters. I don’t usually do this, but I am trading in and out with a small position (e.g recently bought at $64 and $66 and sold at $73). I just think when the company is valued this highly, I’ll wait with my money in other great companies (where I feel significant appreciation is more likely), and only buy back in to ESTC if we see a dip. If we don’t, no problem. There are plenty of others.
Bear