Informatica: a data management company to watch
Informatica, Inc (Infa) is a data management company. Its artificial intelligence (AI) system, dubbed CLAIRE, helps customers connect and consolidate data across multiple cloud systems. Informative is newly public, having closed its IPO in October 2021.
I am neutral on the INFA share. (See Best Analyst Stocks on TipRanks)
Informatica has just been released. However, this is not the first time the company has been listed on the stock exchange. It debuted on the Nasdaq in 1999. It was right before the tech bubble collapsed. The company remained public until 2015, when it was privatized.
That same year, the company launched its first iteration of the data management platform. The latest AI-based platform, CLAIRE, was introduced in 2017. In 2018, the efforts were validated as the company was named a leader in five Gartner Magic Quadrants, including metadata management solutions.
Growth retardation due to model change
Informatica has started to move to an annual subscription model in recent years. Due to this change, subscription revenues are increasing rapidly; however, total revenues are not. At this time, Informatica is not a high growth company, which is of concern.
Total revenue growth in the second quarter of 2021 was only 16% compared to the same period of the previous year. Annual subscription revenue growth was much more robust 34%. This is a metric investors should watch for in the future.
Another problem for the business is the long term debt balance. It stood at $ 2.76 billion when it was last reported. This is a large balance considering that revenue for the previous twelve months was only $ 1.38 billion.
On the bright side, Informatica has posted operating profits for the past twelve months of $ 86 million. The company also has a huge gross margin above 80%. This indicates an ability to scale to even greater profits in the future.
Subscription model indicates future success
The company’s subscription revenue for the quarter was $ 686 million. The company estimates its total addressable market at $ 44 billion, so there are plenty of leads available.
Data is the lifeblood of modern businesses. The ability to use data to run operations effectively and efficiently separates those who are extremely successful and those who are not.
Storing data in stored silos is inefficient and slow. With its AI platform, Informatica is at the forefront of this need for intelligent data management. For this reason, the company has a net retention rate of 116%. This means that it sells more products to its current customers than the churn rate. Currently, the company serves more than 5,000 clients and 84 of the Fortune 100.
The Taking of Wall Street
Informatica has limited coverage on Wall Street. The company has just gone public and is now in its quiet period. There is no analyst activity at this time. Informatica will exit the period of silence on December 6, 2021.
The stock is also in a lock-up period until April 25, 2022, which prohibits some insiders from selling shares. When it expires, insiders can sell and the supply of shares can increase dramatically. This can cause the share price to fall and investors should exercise caution during this time.
INFA opened trading on the Nasdaq at $ 29 per share. Unlike many IPOs, it hasn’t seen significant fluctuations. The current price is about 11% higher than the IPO price. Investors are likely taking a wait-and-see approach due to the sluggish growth mentioned earlier.
TipRanks smart score
TipRanks’ Smart score gives Informatica a neutral rating of 4 out of 10, citing very positive TipRanks investor sentiment and neutral sentiment. Again, there isn’t a lot of coverage on this company, which is why most sections of Smart Score display “N / A”.
Conclusion on Informatica
Informatica has thousands of customers and serves most Fortune 100 businesses. The business serves a legitimate need of these businesses. He is also a leader in five separate Gartner Quadrants categories. It is most encouraging.
Growth and valuation are the biggest questions the stock faces. With a market cap currently over $ 9 billion, the price-to-sales ratio is around 6.5. For this reason, the stock appears to be properly priced and would make a great addition to an investor’s watch list.
Disclosure: At the time of publication, Bradley Guichard does not have a position in any of the titles mentioned in this article.
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