Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Here's My Favorite Stock That No One's Ever Heard Of

By Danny Vena - Dec 9, 2020 at 9:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Unless you work in an accounting department, you probably aren't familiar with this company. You should be.

For those working in the accounting field, the process known as period-end close is -- more often than not -- the bane of their existence. Imagine taking the manual routine of reconciling your checkbook and applying a similar process to dozens (if not hundreds) of income statements and balance-sheet accounts. It can be long, tedious, and frustrating -- and it  plays out every month, every quarter, and every year. That's where BlackLine ( BL -1.68% ) comes in.

On this episode of Fool Live, which aired on Nov. 12, The Wrap host Jason Hall, Fool analyst Jim Gillies, and Fool.com contributor Danny Vena discuss this software-as-a-service (SaaS) company and why it's gaining a foothold in accounting departments everywhere.

Jason Hall: Danny, this is one you've mentioned on the show before, but I still think most people have no idea about BlackLine. Tell us about BlackLine.

Danny Vena: BlackLine is a company. If you are an accountant, the bane of your existence is period-end close, whether it's the end of the month close, the end of the quarter closer or end of the year close, God forbid. When I was an accountant, it was in fact the bane of my existence. You would end up spending anywhere from several days to several weeks, in some cases, several months, closing the books on the most recent financial period.

To put that in a perspective that non-accountants can understand, imagine reconciling your checkbook and then having to do that several hundred times. All of these accounts on your balance sheet, all of the accounts on your profit and loss, on your income statement. It's long and it's nauseating and it's tiring, and there's a little company called BlackLine that found a way to do that digitally so that every day, you can tick several boxes in an app, in some software, and when you get done, that's decreasing the amount of stuff that you have to do at the end of the period. So then rather than taking days, or weeks, or months, it might only take you hours or days to get your period-end close completed. Accountants are thrilled about that, and I can tell you as one that, had that been available when I was on active accounting, oh, my gosh, I would have been on that like white on rice.

This is a company that I'm going to go ahead and just share its most recent earnings with you just very quickly so you can get an idea. This is a company, this is as large as I can make it, but revenue for the quarter increased 21 percent year-over-year. They had a GAAP net loss of $0.15 cents per share, but adjusted net income was about 25 cents a share. They've got operating cash flow of $22 million and they're heavily investing in research and development so they can continue adding features to the product and expanding their market share. Once a customer gets this in-house and tries it out, it ends up expanding to a good majority of the accounting department because instead of one person doing it, now you've got everybody doing it, and then all of a sudden, your month-end close, your quarter-end close is a snap. This is a company that operates as a software-as-a-service company. I think it has a bright future.

It's important to keep in mind, I know some folks will look at that and go "Oh well, that's only 21 percent year-over-year revenue growth." Well, this is a much more niche market than what you're going to see with some of these other companies so it's not going to be that much of a highflier, but it's always been very slow, very methodical, very steady growth, and I think people should look into it.

Jason Hall: I just want to say that adjusted for reality, the normal universe that we live in over years and years and years, 22 percent annual growth is, this is a technical term you might want to write down, real damn good. It's good. Don't let what everybody sees what SaaS and Cloud stocks, the 50, 60, 70, 100 percent plus growth, don't get too adjusted to that as being like setting the bar for you. A company that does something really good and they can grow it by 20 percent a year is probably a great companies to look at, especially I noticed those operating cash and their free cash margins are really good. I've started paying attention to this company since you first introduced me to it, so that's fantastic.

Danny Vena: I just wanted to point out that over the last five years, even at those growth rates, the stock is up 350 percent. That's some pretty solid growth for a stock there.

Jason Hall: That's not too bad. Our good friend Mac Greer just sent me a message and said his new favorite metric is "adjusted for reality." I think we could apply that. That's non-GAAP, but it's real so I love it. Thanks Mac for picking that up, I just see it on my phone. Of course, Jim says so many. Jim, I'm going to make you pick one. I did this for you. Come on, you got to put some icing on this (talking over each other).

Jim Gillies: A couple of things. I'm going to say first-off, Danny is underselling BlackLine, frankly. BlackLine is a fantastic company. My significant other is an accountant, and I'm going to tick off a few other people. That's our Halloween costume. That is my is my better half, and that is her actual wedding dress so I will just leave it at that. But she is an accountant, and yeah, everything that Danny has said in terms of the frustrations that accountants go through, I've had a window seat to those very many things, the complaints that Danny has raised are true. I hear about them on a regular basis.

One of the great things about BlackLine is the CEO slash founder Theresa Tucker. She is wonderful. She's no longer the CEO. She is kicking herself upstairs in the executive chairwoman's slot. But just a great business leader, a great CEO, great founder. I guess two enthusiastic, Foolish thumbs up for Danny's pick here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

BlackLine, Inc. Stock Quote
BlackLine, Inc.
BL
$109.64 (-1.68%) $-1.87

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
673%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.