nCino Inc (NCNO) $35.75
The stock jumped 15-20% post earnings on an earnings beat and slight revenue miss, from $30 yesterday. Guidance is also decent with 15% revenue growth for 2024.
You could buy around $32 or in installments.
Positives
Focusing on profitability, makes decent cash flow of 15% and adjusted operating of 3-5%, showing an improving trend with good estimates of earnings improving 35% in years 2025-2026.
They have the leverage to do that, it’s a SaaS business but I would have preferred gross margins in the high 80’s. That must happen over time.
They are selling to higher cohort customers, growth in customers over 100K and $1Mn is much higher than baseline growth.
There is a switching cost competitive advantage, especially when you’re dealing with larger customers, and have more than one offering.
Negatives
Sales cycles are longer given the higher value customer.
Banking and financial services software is very competitive, not much to differentiate from one another.
Price has gotten a little expensive at 6x sales with 15% revenue growth so returns going forward will be muted in comparison.
Given the weaknesses in banks and the financial services sector, I don’t expect multiples to be more rewarding than the market, even though this is a tech company, but focused on one vertical.