About new SAAS company

Hi All,

I am new on here.

I am quite new in regards to this SASS company investment theory. But I have to say I am super attracted by the ideals. Before I write my proposal about Medallia Inc (MDLA), let me just quickly tell you guys how I have been investing successfully for the past 3 years with an average return of 80% per annum so far.

AS I am sure most of you guys are subscribed to the Motley fool, rule breaker, and stock advisor services. Each month, I will look into the 4 recommendations provided by the services. Through careful research into the company business modes, financial evaluation model using company’s fundamentals such as revenue growth, Gross Margin, etc, P/E, growth rate projection to finally arrive an estimate price figure in which I think the company should be worth for the next 5 years in terms of price. At the end of the month, I would pick the very best one out of the four recommendations. For example 2 months ago, I bought Novocure recommendation which has given me a 55% return already within 2 months. The 12 stocks I bought from motley fool recommendation last year has given me so far 170% return YTD as a whole portfolio.

Bear in mind, this modeling only takes into account the company’s past growth rate performance and discount it by a certain percentage to represent a slow down in the future to arrive at a very conservative price target at a very conservative growth rate. The problem here is that this modeling only works accurately with annual projection, quarter projection seems to be too volatile for me as revenue can go up and down from the previous quarter easily but the company is still a great company. I have tried to look for examples on this board on how you guys would decide to sell or trim positions but I can’t find anything. This is something I would really like to learn in order to occupy this knowledge into my current form of modeling in order to improve. I mean I have positions in MongoDB which I bought 2 years ago, which I haven’t sold at all because I think along with this board MongoDB will go up further. Saul is a master at managing his portfolio, which I think in a way is much more important than analysis skills over the long term. I am really keen to learn this part.

Here we go, let’s start with the Medallia Inc (MDLA)analysis as suggested for my own personal learning experience to grow with you guys on this board. Please bear in mind, since this company is a new IPO, I cannot use my traditional method of financial modeling for this company.

What does Medallia Inc (MDLA) do?

Medallia is a leading customer experience management company based in San Francisco, California with offices in Buenos Aires, London, Tel Aviv, Munich, Paris, New York City, Washington DC, Austin and Sydney.

The below will be associated with Saul’s post:

https://discussion.fool.com/how-i-pick-a-company-to-invest-in-33…

(First, most of my stocks start with a recommendation and write-up by someone I have a lot of confidence in. This could be someone on the board, Bert, Motley Fool, or more rarely a write-up by someone else on Seeking Alpha.)

This stock as I have mentioned is recommended by one of my friend, who works as one of the top analysts on wall street in the tech area who also recommended me crowd strike recently.

(Second, I would want rapid revenue growth. My ideas about that have become inflated in the last couple of years and where I once might have looked for 20% to 25% as very fast growth, I’m now looking for 35% growth, and usually more.)

On page 14 of the below SEC filing:

https://www.sec.gov/Archives/edgar/data/1540184/000119312519…

From 2018 to 2019, revenue has only increased from 261,195 to 313,652 which is only 23.9% increase which falls out of saul’s criteria of 35% or more growth. On a quarterly basis which ended in April, the firm’s revenue increased from 55583 to 71712 which is slightly better at 29% increase.

But it’s gross profit margin is super impressive here at around 80% of the revenue.

(Tied for Third, I look for recurrent revenue. I want my company to have last year’s revenue repeating this year and building from there, and not a company that has to go out and grow by selling the whole thing over again. God, this is important! It usually means software, and a SaaS model, and NOT selling things. You just can’t keep growing at 40% selling things. And when an economic slowdown hits, people will put off buying a new car, or a new house, but companies won’t tear out the software that keeps their company going. Software also usually means not capital intensive, and it also means high gross margins.)

Yes, this company is SAAS based and has recurrent revenue.

(Sixth, I’d demand a dollar-based retention rate over 100%. I look for one over 120%, and I’m impressed by one over 130%. A high Net Promoter score is nice too, but there’s no easy way to get that information.)

From page 74 on the SEC link above, some good net dollar retention numbers:

Our dollar-based net revenue retention rate was 126%, 116%, 122% and 119% as of January 31, 2018 and 2019 and April 30, 2018 and 2019, respectively, on a trailing 12-month basis. This satisfies saul’s criteria.

From the simplified analysis above, I personally think the company has a unique moat and can potentially be an investment. However, the revenue quarter growth of only 29% is below saul’s 35% requirement is what’s keeping me skeptical at the moment in going ahead in purchasing this stock.

In order for me to learn more, Can you guys please post your thou

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Each month, I will look into the 4 recommendations provided by the services

Just FYI… while all stocks are open for discussion here, we cannot, on public boards, discuss recent TMF paywall recs. Typically a 30-day window is a margin of respect for new recs.

🆁🅶🅱
The cheese I have for you, my dear, is real, and very new!

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