Why Cornerstone OnDemand Shares Shot Into the Clouds

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Learning and management software maker Cornerstone OnDemand (Nasdaq: CSOD  ) jumped as much as 15% earlier in the trading session after reporting its second-quarter results.

So what: For the quarter, Cornerstone reported a loss of $0.09 per share as gross revenue rose to $26.7 million, a sizable 54% leap over the year-ago period. These results were pretty much in line with Wall Street's expectations for $26.44 million in revenue and a loss of $0.09. Overall, bookings rose by 51% and Cornerstone ended the quarter with more than 1,000 clients and 9.4 million users.

Now what: Here we have another quarter of solid sales growth from Cornerstone, but high costs continue to yield losses and negate gross margins of 74%. Just as I noted back in March, when I took a highly pessimistic view of Cornerstone, even margins in the 70th percentile aren't enough to make it profitable. Without question, Cornerstone's valuation leaves a lot to be desired. Profits aren't expected by Wall Street for at least two more years, and the company is already trading at 22 times book value. That's far too rich for my blood and I'd consider utilizing today's rally as a reason to exit the stock.

Craving more input? Start by adding Cornerstone OnDemand to your free and personalized Watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1980916, ~/Articles/ArticleHandler.aspx, 10/1/2014 7:05:14 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement