TLND up 14% AH after earnings report

Investment Analysis Clubs Saul’s Investing Discussions
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Talend just reported revenues of $56M for Q4 2018, a 34% increase over Q4 2017. Sales for the full year was $203M, a 38% jump over the previous year.

More highlights:

  • Talend Cloud, the Company’s SaaS offering, represented 25% of new ARR in the quarter and grew over 100% year-over-year for the tenth quarter in a row
  • Record quarterly total revenue of $55.7 million, an increase of 34% year-over-year
  • Quarterly subscription revenue of $48.4 million, an increase of 38% year-over-year, or 33% year-over-year adjusted to exclude the impact of adoption of ASC 606
  • Total customer count crossed the 3,000 customer mark
  • Dollar-based Net Expansion Rate reached 120% on a constant currency basis
  • Generated $1.7 million of Free Cash Flow

As Bert pointed out in this morning’s SA article, TLND was trading at a low valuation compared to other Enterprise Software companies growing at this rate. The stock is up 14% after hours, so the market seems to agree.

Before today’s price jump, TLND’s P/S ratio was 5.9, and it’s EV/S ratio was only 5.0. Even at the after-hours price of $42.45, the EV/S ratio would only be 5.3. Glad that I took a position on this stock after reading Bert’s report earlier today.

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Bert really hit this one out of the park!

While I like the fast growing, high multiple stocks (that we all talk about on this board), he presented a unique opportunity and a compelling case with Talend (relatively low valuation, transitioning to SaaS, low expectations, competitively well positioned, etc).

I jumped on it mid-day today and bought 2X my normal starting position, hoping they could jump over a low earnings bar. It seems they did! I expect this still has plenty of room to run.

I patted myself on the shoulder in after hours (up nearly ~14%), but the credit belongs to Bert!

I highly recommend his very reasonably priced Ticker Target service!

Sanjay

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Yea I joined in today as well.

To me it just seemed that all the bad was priced in and all they had to do was not have a terrible quarter and there would be some relief.

It was the reminder article by Bert yesterday that made me take a look and decide to buy a third position fully aware that the price also could have gone down 14% after hours.

Either way I’ll let it settle and buy my second third.

Chris

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%#(*$^!!!@@@?>"!!!

My last four emails from Bert went to the spam folder. Yahoo mail!!!

2/11, 2/11, 2/13 and 2/15.

KC

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As Bert pointed out in this morning’s SA article, TLND was trading at a low valuation compared to other Enterprise Software companies growing at this rate. The stock is up 14% after hours, so the market seems to agree.

Before today’s price jump, TLND’s P/S ratio was 5.9, and it’s EV/S ratio was only 5.0. Even at the after-hours price of $42.45, the EV/S ratio would only be 5.3. Glad that I took a position on this stock after reading Bert’s report earlier today.

I am a subscriber to Bert’s service and he had a positive article on TLND a couple days ago. The risk/reward looked good at the valuation and the longer term picture still looked bright despite hiccups. I considered initiating a small position but didn’t have any extra funds - I would have had to sell another position. Unfortunately, I didn’t pull the trigger.

Dave

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Talend closed up almost 20% today, but it still looks incredibly cheap compared to its peers. Let’s compare its EV/Sales ratio to some other enterprise software companies that are growing revenues in the mid-30% range.


                   Sales    Gross
Symbol Company     Growth   Margin   Mkt. Cap.   EV/Sales  
====== ========    ======   ======   =========   ========
ZUO    Zuora       33%      51%       2.4B       10.3
WDAY   Workday     34%      70%      41.6B       15.7 
NEWR   New Relic   35%      84%       6.1B       13.1
HUBS   Hubspot     35%      80%       6.6B       12.3 
**TLND   Talend      36%      76%       1.4B        5.0**
DOCU   Docusign    37%      57%       8.9B       12.5

So TLND has a YoY revenue growth rate and gross margin similar to HUBS or NEWR, but has less than half the EV/Sales ratio of those two? If TLND’s valuation was similar to its peers, its stock should be trading well above $90. Thoughts?

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So TLND has a YoY revenue growth rate and gross margin similar to HUBS or NEWR, but has less than half the EV/Sales ratio of those two? If TLND’s valuation was similar to its peers, its stock should be trading well above $90. Thoughts?

Several problems here. I’ll try to take them in order of severity.

  1. Talend’s growth is going to slow. They’ve said (on the Q3 call) that it will be mid20% in 2019. There are no such signs from NEWR (quite the opposite). I don’t know about HUBS.

  2. NEWR and HUBS are profitable. Their PE ratios – and more importantly what they will be in a year or two – definitely need to be considered. Meanwhile, Talend still has very significant losses. With slowing top line growth, it will be difficult for them to get there any time soon.

  3. TLND is in transition. Their highest potential product is only 25% of their revenue or so. Maybe that trend continues to improve…I’m still not convinced about how much potential it has. It’s still coming off a small base.

  4. NEWR and HUBS are clear leaders in their spaces. Talend is small and niche now, so do they have a large TAM? Remains to be seen.

  5. Talend has had a rough year, so they are up 20% even after a sad quarter where they missed their own revenue guidance. They have a lot to prove before they deserve a higher valuation.

Bear

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