Will Qlik Technologies Outperform in 2011?

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.

Foolish facts

Metric

Qlik Technologies

CAPS stars (out of 5) *****
Total ratings 190
Percent bulls 96.3%
Percent bears 3.7%
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.
  • 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

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Revenue growth Not available 65.8% 55.7% 38.5%
Normalized net income growth Not available Not measurable Not measurable Not measurable
Gross margin 90.4% 90.2% 88.8% 88.0%
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

2011

2012

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.

What will be next year's best stock? The Motley Fool has created a brand new free report called The Motley Fool's Top Stock for 2011. In it, we reveal the little company set to profit from the broadband Internet expansion. Get instant access by clicking here – it's free.

Interested in more info on the stocks mentioned in this story? Add Qlik Technologies, SAP, IBM, Oracle, Actuate, RealD, SMART Tech, or Google to your watchlist.

Ebix, Google, and Qlik Technologies are Motley Fool Rule Breakers recommendations. Google is also a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Google and Oracle at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. 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 owns shares of Ebix, Google, IBM, and Oracle and is also on Twitter as @TheMotleyFool. When it comes to stocks, the Fool's disclosure policy is a lookie-loo.


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