Last week's third-quarter report was another show of flexing biceps despite our troubled times. The middleware expert came up with $0.06 in net earnings per share, or triple the $0.02 seen last year. That's thanks to 28% higher revenue of $67.5 million, wider profit margins, and a generous share-buyback program.
However, five years of around 20% compound annual sales growth and 50% higher earnings per share, year by year, has hardly moved TIBCO's share price. Rivals such as Oracle (Nasdaq: ORCL ) and SAP AG (NYSE: SAP ) have seen stock returns of 65% or more in that five-year period. Other tech businesses TIBCO's age, including Linux specialist Red Hat (NYSE: RHT ) and customer-relations expert Salesforce.com (NYSE: CRM ) , have also crushed TIBCO's five-year returns of around 30%. That's hardly fair, dude.
Those are the first two reasons you should care about this stock: sustained massive business growth and a mismatched share-price trend. Annual earnings growth of 50% should be worth a market cap of about 50 times trailing earnings, but the stock trades at just 27 times earnings now. That's one juicy PEG ratio, Fool.
The third reason to care is TIBCO's unique market opportunity, as management sees new doors opening every day. You might assume that TIBCO's incoming orders will dry up soon, given the company's heavy exposure to the financial sector. But in the earnings call, CEO Vivek Ranadive told analysts that his customers aren't being "skittish" at all. Vivek sees the market for business-intelligence software standing at a crossroads, much like the shift 20 years ago from monolithic mainframes to server-and-client models built on databases.
This time, the new hotness is the Enterprise Service Bus, where real-time XML messages are passed around your entire management platform and databases are becoming mere storage spaces rather than the engines of business processes. "A big shift like this comes around every 20 years," Vivek told me in a phone interview, "and this time we're the market leader in the new space."
Put the three together, and you get an astonishing investment opportunity. Whether it's Oracle or IBM (NYSE: IBM ) that realizes TIBCO's full value with an opportunistic buyout, or the company stays independent for the long run, I can't see any way to lose on this one.