Public article on SA by Bert
Is Elastic’s Share Price Ready To Bounce Higher https://seekingalpha.com/article/4271240?source=ansh $ESTC
As mentioned, Elastic shares are not cheap when looked at in absolute terms and considering the current EV/S ratio. That said, Elastic’s EV/S ratio is the lowest of all of the company’s other than Square (SQ) that are growing at greater than 40%. Workday (WDAY) with growth of around 27% has about the same EV/S ratio as Elastic. Of course part of the rationale for that kind of valuation disparity is based on size, and a greater part of it is based on Workday’s 20% free cash flow margin.
Not all readers will be comfortable in owning a hyper-growth name, even if it is a relative bargain. But I think it is hard to invest in the IT space and not have some exposure to newer, hyper-growth businesses. I won’t try to detail some of the reasons for that-but suffice it to say, institutions in particular are looking for growth and will continue to attempt to buy decent sized positions in company’s such as Elastic. I find its prospects to be particularly attractive and have added it to my portfolio at current prices. I expect it will generate positive alpha from this point.