MuleSoft: High-Risk, Small Cap Buy
09/19/2017 2:57 am EST
The company is benefiting from disrupting the $32-billion market for integration software. MuleSoft offers an efficient alternative to pricey custom integration solutions and clunky legacy offerings from traditional vendors, such as IBM (IBM) and Oracle (ORCL).
MuleSoft shares have pulled back to the low $20s despite the company's strong Q2 earnings report. Revenue growth in the latest quarter accelerated to 57% from 56% in Q1.
The market cap stands at $2.71 billion. There's $337.1 million in cash & investments on the balance sheet, with no debt.
The consensus revenue estimate for 2017 of $280.1 million (slightly above the guidance midpoint) represents growth of 49.2%.
Using the enterprise value, the stock trades at 8.5 times the forward revenue estimate and 6.3x the 2018 consensus revenue estimate of $375.7 million (representing growth of 34.1%).
MuleSoft went public in March 2017 at $17 and opened for trading the first day at $24.25. The post-IPO high is $29. The risk level is high, as short-term drawdown potential exceeds 10%.