Before the Call: Awaiting Applix

Business intelligence. An oxymoron, right? Actually, no, it's a market -- and a rather big one, at that. Within this $50 billion ocean of revenue is analytics specialist Applix (Nasdaq: APLX  ) . Will it find sunken treasure? We'll know more when the company reports second-quarter earnings tomorrow afternoon.

In these few hours before we find out whether Applix is the pick of the BI litter, let's take a moment to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 60,000 investors for their views on well over 4,000 firms, Applix among them. Here's what Fools have to say about the company.

Up or down?
More than 232 investors have weighed in on Applix, including yours truly, who made it a pick for our Rule Breakers service last month. I'm down more than 8% since.

But I'm still very confident in the recommendation, and I'll be buying shares as soon as the Fool's disclosure rules allow (roughly two weeks from now). What's my faith based on? Valuation. Applix trades for roughly the same multiple to sales that slower-growing Hyperion did when it was acquired by Oracle (Nasdaq: ORCL  ) in March.

CAPS investors are similarly bullish. Roughly 99% of them think the stock is a bargain at these levels. And every one of our best stock pickers -- the CAPS All-Stars -- says buy, resulting in a sparkling five-star rating for Applix.

That's rarefied air indeed. Only a handful of Applix's application-software peers earn the same five-star distinction:

Application Software Group

CAPS Rating (out of 5)

American Software (NASDAQ:AMSWA)

*****

Applix

*****

CommVault Systems (NASDAQ:CVLT)

*****

Smith Micro Software (NASDAQ:SMSI)

*****

Systems Xcellence (NASDAQ:SXCI)

*****

Taleo Corp. (NASDAQ:TLEO)

*****

Source: Motley Fool CAPS

Wall Street vs. Main Street
The white-shoe pros have mostly ignored Applix, though the pair that have taken a gander like what they see -- Needham & Co., especially. Analysts there gave the thumbs-up to Applix in January, leading to a 29-point drubbing of the S&P 500.

Bull pitch
The Professor Positives among Applix investors point to a strong balance sheet and, like me, see the valuation as no worse than reasonable. As one Fool says, "... everyone is scared to short it because it's growing 24% with a P/E of 25." Still others point to the strength of the BI industry, saying "this is a business software category that is in great demand." True. I'll add that Applix serves midmarket businesses that can't spend millions to install full deployments of Oracle, SAP, or Microsoft software.

Bear pitch
Meanwhile, the teeny group of Sally Sourpusses has ... nothing to say. So I'll say it for them. As great as Applix is, it faces serious competition. Any one of the big three has the resources to put this rebel out of business in the midmarket if it really wants to do so. My guess is that they'd all rather not be hassled.

Fool on ... and on, and on, and on
Want more? To discover the Fools behind the words, to examine their records, and to find further Foolish coverage of Applix, just click here.

How great is growth? Eleven of the dozens of stocks in the market-beating Motley Fool Rule Breakers portfolio, which includes Applix, have more than doubled. Discover their identities with a 30-day free trial to the service.

Fool contributor Tim Beyers, ranked 3,434 out of more than 60,000 participants in CAPS, owned shares of Oracle at the time of publication. Find Tim's portfolio here and his latest blog commentary here. Microsoft is an Inside Value pick. The Motley Fool's disclosure policy says an apple a day keeps the Street away.


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