In this segment from Motley Fool Money, host Chris Hill polls analysts David Kretzmann, Seth Jayson, and Jason Moser about the IPO of SVMK (SVMK +0.00%), parent company of SurveyMonkey, which attracted plenty of enthusiasm from investors last Wednesday. The business of helping organizations learn from their employees and customers doesn't exactly scream "hot market," and while it's cash flow positive with 600,000 paying users, growth is slow. The Fools consider the current situation, the outlook, and whether this new stock is a buy at these prices.
A full transcript follows the video.
This video was recorded on Sept. 28, 2018.
Chris Hill: Another week, another hot IPO. Survey Monkey went public on Wednesday. Shares popped more than 40%. David, I get that Survey Monkey is the world leader in digital surveys. But this enthusiasm, is it warranted?
David Kretzmann: Nothing sexier than survey software, right, Chris? They're going after a few different markets. They're going after talent management, customer experience management, and market research, essentially trying to help organizations learn more from employees and customers. Those are multibillion dollar markets worldwide. They operate both domestically here in the U.S. Internationally, as well, makes up a good chunk of their revenue.
There are some things that are attractive about the company. They are cash flow positive. They have 600,000 paying users and a lot more registered users. But, the company's not growing all that quickly. Revenue only grew 6% in 2017. So far this year, sales are up 14%. After that pop with the IPO this week, they're trading for about 10X revenue, which seems like a really generous multiple for a company that isn't growing all that quickly. I'm definitely not rushing in to get into this IPO.
Seth Jayson: We do Survey Monkey stuff here, but where they're kind of company where we have Okta, because we all have 15 different logins. I just wonder, how long can that last when you have companies like ServiceNow or Paycom lumping in an awful lot of HR and related systems all in one?
Kretzmann: Even Alphabet or Slack.
Jayson: Yeah, even something free from Google. It's hard to compete with, you would think. But maybe it's not. Maybe I don't know what I'm talking about. Look, they're earning a bunch of revenue already. It just seems like the kind of thing that, I don't understand how it could stay long-term.
Hill: They also have a pretty catchy name in Survey Monkey.
Jayson: Survey Monkey.
Kretzmann: That's the thing, the company was founded in 1999. You have to take a step back and wonder why now for the IPO, when they aren't really growing all that quickly? They are known for having a strong employee culture. Leadership at the company is impressive. Sheryl Sandberg is on the board of directors. She owns 10% of company. Her late husband used to run the company. Serena Williams, the tennis star, is on there. Intuit's CEO. They do have heavy hitters there. Some of the qualitative stuff, you have to like. But the numbers, I just don't think, back up the generous valuation.
