Each year, we take a look back in order to look ahead. We do this by industry, by trend, and ultimately by stock. Here's a closer look at Qlik Technologies (Nasdaq: QLIK ) , Fool style.
|CAPS stars (out of 5)||*****|
|Bullish pitches||18 out of 21|
|Highest-rated peers||Ebix, Fundtech, Intuit|
Data current as of Dec. 29.
Most Fools who've rated QlikTech in CAPS are as enthusiastic about the company as I am. How enthusiastic am I, you ask? Recently, I named this popular provider of business intelligence software as my choice for the best tech stock of 2011.
"QlikTech's advantage is that simplicity breeds use, and use leads to distribution of essential information. This is how smarter organizations get born," I wrote at the time.
Most, but not all, of you agree. Those who don't, argue the stock has doubled into a valuation it can't possibly sustain. A recent IPO. A triple-digit P/E ratio. A crowded market led by SAP's (NYSE: SAP ) Business Objects, IBM's (NYSE: IBM ) Cognos, and Oracle's (Nasdaq: ORCL ) Hyperion Software. Bears see all sorts of warning signs.
"Applix had developed a nice [online analytical processing] engine ... On September 6th 2007, Cognos announced its intention to acquire Applix, paying $17.87 per share [and] valuing Applix at $339 million in cash, [or] around 6 times annual revenues. This stock is worth less than $339 million," wrote Foolish investor CiskoWalt earlier this month.
Looking back to look forward
While I'm always game for a good doomsday scenario, this one seems unlikely. QlikTech already commands more than $2 billion in market cap, and judging by the year's big QlikTech stories at Fool.com, even that may be low:
- Small BI stocks were capturing our attention as early as February, when QlikTech peer Actuate (Nasdaq: ACTU ) reported deceptively good results. The company produced $16 million in free cash flow for 2009, and firmed up what was already a good balance sheet.
- By July, the market was ready to start pumping out a new crop of hot IPOs. QlikTech joined RealD (NYSE: RLD ) and SMART Tech (NYSE: SMT ) as new issues and investors couldn't get enough. The stock popped more than 20% on its first day of trading.
- Enthusiasm for BI generally and QlikTech specifically grew in September when Google teased improvements to its search engine that could make it more of an analytical tool.
- But then December's cold winds blew in a secondary offering, and what had been an impressive rally reversed itself. QlikTech allowed early investors to sell 11.5 million shares for $23 apiece.
- Two weeks later, I argued Qlik's in-memory BI technology would grow fast as a consequence of being easier and cheaper to adopt than traditional OLAP alternatives. QlikTech would be the best tech stock to own in 2011, I said. Dozens of CAPS investors joined the refrain in the days following.
Calling their commitment a leap of faith is probably going too far. But QlikTech's brief history of financial performance hasn't exactly been consistent:
2009-2010 Quarterly Review
|Revenue growth||Not available||65.8%||55.7%||38.5%|
|Normalized net income growth||Not available||Not measurable||Not measurable||Not measurable|
|Return on capital||Not available||Not available||60.3%||10.5%|
Source: Capital IQ, a division of Standard & Poor's.
More encouraging is what analysts expect from QlikTech over the next two years. According to Capital IQ, the stock trades for 44 times estimated 2012 earnings:
Capital IQ Estimates
|Revenue estimate||$267.6 million||$342.4 million|
|Normalized profit per share estimate||$0.39||$0.60|
Source: Capital IQ. Data current as of Dec. 29.
Foolish outlook: bullish
As growth stock multiples go, that's pretty reasonable. Analysts project QlikTech will triple per-share earnings over the next two years. If they're within even spitting distance of being right, there's more than enough growth here to justify buying at current prices.
Now it's your turn to weigh in. What do you think of QlikTech's prospects? Use the comments box below to explain your thinking. You can also rate Qlik Technologies in Motley Fool CAPS.
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