Does Tableau's Valuation Make Sense?

Does Tableau's growth alone validate its trading at a premium to the likes of Tibco Software and Qlik Technologies?

Feb 12, 2014 at 1:00AM

Tableau Software (NYSE:DATA) is one of the hottest names in big data. The company helps businesses process, read, and react to data more effectively. But as investors take big bets on Tableau's future, is it possible that more upside can be found in peers Tibco Software (NASDAQ:TIBX) or Qlik Technologies (NASDAQ:QLIK)?

What is big data?
Big data offers services that make life easier for a company's customers, creates platforms where information can be stored in the cloud, and gives businesses and their employees access so they can better interact, engage, and understand industry- and company-related data.

One segment of this space is called data visualization, and this is an area where Tableau has thrived in the last year due to its user-friendly platform. The company competes directly with other data-visualization companies like Tibco and Qlik.

A little perspective
There's no debating that Tableau had an exceptional quarter earlier this month: The company saw revenue growth of 94.9%, which was an acceleration from its prior quarterly growth of 90%.

Not to mention, in an industry plagued with intense competition and heavy spending, profits are rare. Yet, Tableau managed to earn a non-GAAP net income of $14 million, a very impressive feat.

However, regardless of Tableau's mind-boggling growth and its 1,800-plus new customers added in a three-month span, investors must still be concerned about its valuation.

Tableau saw quarterly revenue of just $81.45 million, and in 2014, analysts expect the company to take in $327 million in revenue. Yet, the stock trades at 17 times future sales.

To put this in perspective, Tableau's competitors Tibco and Qlik, combined, have a market capitalization of just $5.7 billion -- comparable to Tableau. But together, they are expected to generate revenue of $1.7 billion in 2014.

Essentially, Tableau is worth just as much as the combined valuations of two competitors that alone are significantly larger. Therefore, investors are taking massive bets on Tableau to not only maintain growth, but to own this data-visualization space in the future.

The problem is that Qlik and Tibco are not bad companies
Tableau's advantage is that it has become appealing to large customers, and that its platform provides interactive data that is easy to use. However, these companies all offer similar services at different prices, and platforms from all of these companies are becoming more user-friendly with time.

Qlik provides data-visualization platforms to small and medium-sized businesses to integrate and store data to be shared across various work groups and divisions. Thus, Qlik allows users to make more informed business decisions.

For this upcoming year, Qlik is expected to grow by 18%, with sales of $550 million. At 4.25 times expected revenue, it is much cheaper than Tableau. The only negative is that Qlik is not profitable, having an operating margin of near zero, due to high costs. However, peer Tibco is very profitable, with operating margins of almost 15%.

Tibco is a leader in business optimization and process management, providing platforms to integrate and analyze operational data. While its expected revenue growth is much smaller at 8%, this is a company generating more than $1.1 billion in sales, trading at just three times forward revenue.

As a result, given the size, value, and growth rates of these companies, it is hard to validate an investment in Tableau despite its rapid growth. In fact, investors must acknowledge that there are no guarantees Tableau will ever reach $550 million or $1.1 billion in annual sales, much less carry the growth rates of its peers Qlik or Tibco if the same fundamentals are ever earned.

Final thoughts
The business intelligence market is estimated to be worth more than $13 billion, and big data and cloud services are rapidly becoming a larger piece of this pie. With that said, Tableau is believed by many to be a top investment opportunity within this space in the years ahead. However, it is already priced for greatness, and is still very much unproven.

Investors might be better served by looking at one of Tableau's peers, such as Tibco or Qlik, two companies with impressive growth and valuations that still allow for further upside. However, given Tibco's impressive margins, 8% growth rate, and cheapest valuation multiple, it might be the safest and best investment for the future.

The bottom line: It appears Tableau has reached a valuation beyond reason, and most likely, this won't end well for investors who were late to the game.

Looking for a stock with big growth ahead?
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Qlik Technologies and Tibco Software. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 10:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers