Tibco Software (Nasdaq: TIBX ) sure made me look good in 2010. I picked the forward-thinking enterprise-software company as the tech stock to beat this year, and the company came through in spades. Eric Jhonsa's SanDisk (Nasdaq: SNDK ) delivered a spirited 122% return, and the whole set of choices did very well, but Tibco outplayed, outwitted, and outlasted them all with a mighty 138% return.
You know the really cool thing about that? Tibco CEO Vivek Ranadive still thinks my market-crushing pick has lots of room left to stretch its legs.
"How do you explain this?" he asked me in an exclusive call after yet another impressive earnings report this week. "Our earnings per share is up 38% year over year, revenue grew 21%, our license sales grew 22%, operating cash flow grew 30%, and … we still have people like salesforce.com (NYSE: CRM ) trading at three times my multiple."
That is indeed roughly how Tibco's valuation compares with salesforce.com's, at least in terms of enterprise value to trailing revenue. Using the more common price-to-earnings shorthand, salesforce.com is more like five times more expensive on a trailing time scale and four times looking at next-year projections.
Sure, salesforce.com may be an extreme example of nosebleed valuations, but it's actually pretty easy to find generous multiples among Tibco's direct rivals. Tibco might indeed deserve a richer valuation still, or at least more respect. Most investors still don't understand why and how Tibco keeps beating expectations and stealing accounts from name-brand rivals IBM (NYSE: IBM ) , salesforce.com, and Oracle (Nasdaq: ORCL ) every quarter.
The premise of Tibco's core products is very simple: To make the best business decisions, it is better to have a little bit of information at hand exactly when you need it than to get an exhaustive report five minutes after your customer walks out of the store, or five weeks after a major business outage. Database-centric applications are great at delivering impressive reports after spending a lot of time gathering data, while Tibco's information-bus architecture is built for reporting on the fly and supporting snap decisions.
Whys and wherefores
Information-driven businesses are starting to wake up to Tibco's "two-second advantage," which is why the business is growing so rapidly. But the growth story still has a lot of life left in it, because there are multiple catalysts shaping up for the next year or two.
Mobile computing combined with cloud computing almost demands a transactional information-management system. Ranadive is particularly enthusiastic about retail customers, who currently make up a mere 4% of Tibco's sales but should move up to double-digit contributions soon enough if current trends continue.
As an example, Ranadive told me that Wal-Mart (NYSE: WMT ) is a big Tibco customer. Macy's (NYSE: M ) took the extreme leap of faith of implementing a Tibco system for its in-store promotional materials on Black Friday this year -- and walked away not only unharmed but very happy with the outcome.
But wait -- there's more!
On top of that, the near field communications (NFC) standard looks like an obvious fit for Tibco's strengths. That love child of Bluetooth and RFID technologies could be used to beam coupons into your cell phone when you walk by a store display, track your in-store movements and try to predict what you might want to buy next, and help businesses manage their customers in a myriad number of ways Ranadive and I haven't thought of yet. If that standard takes hold the way some handset designers are hoping it will, that could be an exciting catalyst for Tibco as well.
So you have proven growth and a plethora of additional boosters coming up on the horizon. Tibco isn't dirt-cheap like an IBM, but I agree with Ranadive that the stock deserves more market respect than it's getting. The company has bought back $800 million of its own shares over the past six years and just re-upped its buyback policy again. That's what you do when you think it's a good use of your capital.
Is Tibco the best tech stock for 2011 too? Darned if I know, but it should certainly continue to reward investors. Grab a free report to see what some of our top analysts see as the best choice for the new year.