Alteryx (AYX +0.00%) has delivered a fantastic one-year stock price gain above 50% to its shareholders, but it has been a wild ride getting there. Over the last 365 days, the stock peaked above $147 twice and dropped below $90 three times. That sort of roller-coaster ride is enough to make even experienced investors queasy. Despite these short-term gyrations, though, it's worth your time to take a deeper look at this data analytics platform provider.
Let's discuss the business, its prospects, and how the company is dealing with the impacts of the coronavirus pandemic. We'll wrap by letting you know whether this stock is worth picking up around its current level of around $130 (about 19% off the all-time high it hit in February).
One-year stock price chart through May 15, 2020. AYX data by YCharts
The business of data analytics
Alteryx sells data analytics software that gives advanced spreadsheet users powerful tools that can reduce the time it takes to prepare data, which means that more time can be spent analyzing it. The software can also be used by serious data scientists who typically depend on coding to do their number crunching. Alteryx's capacity to meet the needs of all levels of analysts across an enterprise is one reason companies chose its platform.
Over its 23-year history, it has built an incredible competitive advantage with its platform, and its recent growth numbers show how this is paying off. Over the last three calendar years, its revenue has tripled to $418 million, and in its most recent quarter, Alteryx continued the trend by posting impressive 43% year-over-year growth.
|
Metrics |
2017 |
2018 |
2019 |
Q1 2020 |
|---|---|---|---|---|
|
Revenue |
$131.6 million |
$253.6 million |
$417.9 million |
$108.8 million |
|
Revenue growth |
53% |
93% |
65% |
43% |
|
Net income |
($19.5 million) |
$28.0 million |
$27.1 million |
($15.5 million) |
|
Net income as a percentage of revenue |
(15%) |
11% |
6% |
(14%) |
Data sourced from company filings. Table and calculations by author.
Even though this analytics specialist has turned a profit during the last two years, in its most recent quarter, it posted a $15.5 million loss. In combination with management's tepid forecast for second-quarter revenue growth in the 10% to 15% range, this may be making some investors worry that the company is losing its mojo. But that's not the case at all.
Image source: Getty Images
The growth potential for analytics
More and more customers are realizing the benefits this analytics toolset can bring them. In the most recent quarter, Alteryx added 356 new customers -- 30% more than in the prior-year quarter -- to bring its total to 6,443. Customer growth over the long run has been astounding. Just two and a half years ago, in the third quarter of 2017, the company had 3,054 customers, less than half what it has today.
It's not just attracting small businesses to its platform, either: 37% of the companies in the Global 2000 are on its client list. Once a company signs on, its spending tends to grow over time. Last year, Alteryx reported that within 18 months, customers are spending on average more than twice their initial purchase; its top 25 customers are spending 33 times more than their initial buys. In its most recent quarter, it posted 128% net revenue expansion overall with 140% net revenue expansion for its Global 2000 customers.
What's especially impressive is the broad range of industries where its analytics tools are used. Notable customers added this quarter included Royal Bank of Canada, tech communication specialist Vodafone, and pharmaceutical giant Pfizer. Even as governments were issuing stay-at-home orders and non-essential businesses were closing, Alteryx signed up a number of companies in the travel and oil industry including Royal Caribbean Cruise Lines, Copa Airlines, and Chevron U.S.A.
Even as the coronavirus is upending business plans around the world, Alteryx is ensuring it can thrive in the years ahead.
Adapting in the face of COVID-19
The company has almost $1 billion in cash and cash equivalents on the balance sheet, and last quarter generated $20 million in operating cash flow. It suspended its revenue guidance beyond the second quarter, and rescheduled its 2020 in-person conferences to next year in lieu of hosting a digital event.
The company (like many others) shifted to a work-from-home operation to ensure employee safety, and will remain that way for the foreseeable future. For customers, it launched a Virtual Solution Center that enables them to connect with solutions engineers and experts directly. Lastly, for people who are unemployed or who have been furloughed, it has partnered with Udacity on a program they call Advancing Data and Analytics Potential Together (ADAPT). Those who are out of work can apply to the free program and, if accepted, will spend 120 hours training on data analytics and receive six months of free access to the Alteryx Designer toolset. This creates some positive brand awareness for the company and is a great opportunity for people seeking to enhance their skills while looking for work.
A recommendation and a word of caution
Alteryx is a market leader in its field with a large and ever-growing opportunity, but as a high-quality growth company, its stock carries a high price-to-sales ratio around 20. For those with an eye on what this company might become in the next five or 10 years, Alteryx looks like a buy today.
But investors should be aware that the stock will likely continue to be volatile in the nearer term. Given the uncertainty about how the pandemic might impact its business and the company's high valuation, the stock could take a hit if quarterly results don't match up to expectations. Long-term investors know that volatility is just part of the deal, and even the best market-beating stocks experience down periods now and again.
