Stock for newly public tech company nCino (NCNO) has been off to the races. The banking software firm priced its July 14 IPO at $31 a share, and it had for a time more than tripled in value in the weeks that followed.

It's still up by more than 160%, and after reporting Thursday on its fiscal 2021 second quarter (which ended July 31), the high-flying stock is holding onto most of those gains. Here's why it's worth putting this newly public company on your watchlist.  

An assist for the digital banking revolution

nCino built what it calls the "Bank Operating System" using the customer relationship management and data integration cloud platform of (CRM 0.33%) (which is also an investor in it). Financial institutions can use the turnkey software suite to manage everything from new customer onboarding to internal workflows to operational data analytics. On its website, nCino boasts creating real return on investment for its customers, reporting such metrics as an average 92% reduction in servicing costs, a 40% reduction in loan closing times, and a 127% increase in account opening completion rates.  

The marble exterior facade of a bank.

The image of banking that nCino is trying to change. Image source: Getty Images.

The cloud software firm touts among its clients a myriad of small and mid-sized banks and credit unions, as well as big financial institutions such as TD Bank and Santander. And during the second quarter -- amid the most intense phase of the pandemic lockdown -- nCino found its services in high demand.

It reported adding a number of big global banks to its customer list, including one multinational that helped nCino make its debut in three new countries (bringing its total to 13). And 87 financial firms reportedly used nCino to help with the processing of Paycheck Protection Plan and Forgiveness loans during the first half of the year, including 45 banks with assets over $5 billion.

High growth comes with a high price

As to specifics of the Q2 report card, nCino reported a 52% year-over-year increase in revenue to $48.8 million, including a 70% increase in the primary "subscription revenue" segment -- comprising access to its cloud-based banking software -- to $39.4 million. Its adjusted net loss narrowed to just $531,000 (compared to a loss of $5.83 million last year), although free cash flow (revenue less cash-only operating expenses and capital expenditures) was $21.6 million during the period.  

Paired with its Q1, nCino is having a pretty good first year as a public concern and is building on the 51% revenue advance posted during its fiscal 2020.


Six Months Ending July 31, 2020

Six Months Ending July 31, 2019



$93.5 million

$61.8 million


Adjusted net income

($3.50 million)

($8.14 million)


Free cash flow

$29.0 million

$8.08 million


Data source: nCino.  

With the digital world more important than ever in this era of social distancing, nCino could have plenty of gas left in the tank -- and it has the balance sheet to support its ambitions to become the go-to software outfit for financial companies. At the end of July, it had $388 million in cash and equivalents on the books, and zero debt. It also issued full-year guidance calling for at least $193 million in revenue, which would amount to year-over-year growth of 40%.

The catch for investors, as is becoming increasingly common these days with high-flying cloud software stocks, is valuation. This recent arrival to the public markets already boasts a market cap of $7.68 billion. Based on its fiscal 2021 outlook, shares are trading for around 40 times revenue. As good as 40%-plus revenue growth may be, the stock is a little too rich for my taste at this point.

However, as nCino is starting to turn the corner on profitability, the "Bank Operating System" company is most certainly worth keeping an eye on. When tech businesses hit this stage of their life cycle, they can put up some impressive results in very short order -- a truth exemplified by life sciences software firm Veeva Systems, which was also partially built using Salesforce's wares. If nCino can maintain its pace of growth -- and if shares pull back a bit from current levels -- I might quickly change my mind and open a small position. 

In the meantime, investors can also reap some rewards from nCino's success by investing in Salesforce. That looks like the better route to me given the sky-high expectations baked into nCino's share price at the moment.