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Here Are 5 Reasons to Add Cvent to Your Watchlist

Cvent  (NYSE: CVT  ) oversees a cloud-based event management software capitalizing on what turns out to be a global industry that cycles more than $550 billion (with a b) each year. Cvent has fallen out of favor with the market since its IPO last August -- the stock has dropped more than 22% so far this year -- but here are five reasons you should add the company to your watchlist: 

1. Leadership
Founder and CEO Reggie Aggarwal has a zest for this business that is evident in any of his interviews. Cvent was started in 1999, survived the burst of the tech bubble (barely), and now brings in more than $100 million of revenue each year and counting. 

"We still remember the bad times," says Aggarwal, "and we're always going to think like a start-up, which is don't get arrogant, treasure your customers, treasure your employees, and be frugal."

Aggarwal is surrounded by an experienced management team, many of whom have been with the company since its founding in 1999. Chief technology officer David Quattrone, chief information officer Dwayne Sye, and executive vice president Charles Ghoorah have been with Cvent since 1999. Senior vice president Brian Ludwig has been with Cvent since 2000.

2. Sales growth 
Cvent has capitalized on its growing niche in field of event management, with sales expanding at an average annual rate of 25.32% since 2010 to $111.14 million in 2013. In the first quarter of 2014 sales grew 28.9% year-over-year. 

3. Company culture 
Aggarwal's passion for the business has translated not only into a growing business, but a strong company culture as well. As CEO, Aggarwal receives an employee approval rating of 80% on Glassdoor, a site where employees anonymously rate their place of work. Cvent as a whole earns a 3.6/5 rating from employees. 

4. Free cash flow production 
Cvent is solidly free cash flow positive, meaning the company produces more operating cash flow than capital expenditures. Cvent has been free cash flow positive the past three fiscal years and produced $10.72 million in free cash flow in 2013. In the first quarter of 2014 free cash flow increased 22.45% year-over-year to $18.71 million. 

This free cash flow production has helped the company build an arsenal of $201.66 million in cash with no debt. The IPO last year also added a good deal of cash, but the business continues to produce cash that is added to the balance sheet. 

5. Innovation 
Over the past four years Cvent's R&D spending increased 5 times to $11.19 million in 2013. As Cvent enters the stage as a public company, Aggarwal says the company is especially focusing on innovations in the mobile field as well as expanding on a global scale. These significant opportunities -- and management's focus on continued innovation -- give me confidence in Cvent's long-term growth prospects.

Foolish bottom line 
Cvent is a company investors should watch closely. It isn't often that you find experienced leadership, an innovative culture, and strong cash flow generation all within one business. 

Cvent currently trades at a price-to-sales ratio of 9, so the stock will likely be volatile in the short-term. However, should the company's growth continue, Cvent can likely grow into its valuation over the long haul while outperforming the market in the process. 

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David Kretzmann

David started investing in stocks when he was 12 years old and has been a Fool ever since. He is a graduate of Berea College and the Motley Fool's Analyst Development Program, serving as an analyst in Rule Breakers and Supernova. Follow David on Twitter @David_Kretzmann.

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9/3/2015 4:00 PM
CVT $32.71 Up +0.03 +0.09%
Cvent CAPS Rating: ***