Zoom Video Communications (ZM +0.78%) has become a way of life for many employees over the course of the pandemic. It's no surprise that its business has benefited considerably from the massive influx of customers. But interestingly enough, the stock is valued close to what it was pre-pandemic. On a Fool Live episode recorded on June 16, Fool contributor Brian Withers discusses why now could be a good time to take a look at owning this stock.
Brian Withers: Finishing up, we're going to get to Zoom Video Communications. ZM is the ticker. Hands down, every single metric for Zoom is better, substantially better than coronavirus, and yet, the price-to-sales ratio is at or below what it was pre-pandemic, making me think the market is way undervaluing this high-quality business. Let's go to a couple of slides.
Growth, outstanding. Look at this, Q1 of FY20, $122 million, almost 10x two years later. That's insane. Every single metric across the board, we just talked about revenue. Look at non-GAAP [adjusted] operating income, $20 [million] to $400 [million]. [laughs] It's a 20x change. Operating cash flow, $30 [million] to $500 [million]; free cash flow, $17 [million] to $450 [million]; remaining performance obligations, we talked about how important that was, $500 [million] to $2 billion. A 4x gain over two years. Net expansion rates 130 percent. Customers just through the roof. Customers with more than 100k [in annual spend], up 4 times. Just an amazing performance, and it's going to continue.
They're projecting revenue at 50 percent growth year over year; non-operating income, 45 percent; and EPS up 30 percent. But look at the price-to-sales ratio. It's bouncing back off of its low -- I prepared this a couple of weeks ago -- even lower than it was pre-pandemic. This is pre-pandemic, so it's almost never been priced better than it is today, and it's all-around a significantly more solid company than it was pre-pandemic. So I'm excited about Zoom for the foreseeable future.
