Down nearly 60% from its all-time high and 40% year to date, Alteryx (AYX) has not seen the recent returns that its tech brethren have enjoyed. Despite reporting favorable second-quarter results, the stock dipped another 14%. Given these disappointing returns, it would be reasonable to assume Alteryx's core business is in trouble.

But you'd be wrong. Alteryx's revenue increased 25% over last year's second-quarter numbers. Annual recurring revenue increased even quicker and was up 27%. While customer growth was only 10%, Alteryx's land and expand business model means these new additions will produce a larger amount of revenue in the future. This approach relies on getting new clients to try Alteryx's product—the landing phase. After the benefits of the platform are realized, more licenses are purchased and the buyer expands their usage. Expansion shouldn't be a problem with Alteryx, as their customers rave about Alteryx's products. 

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Customers can't praise Alteryx enough

Alteryx makes software for data scientists and analysts. These tools allow them to be extremely efficient by automating processes. Its Designer software allows analysts to perform 100-hour tasks in as little as two minutes and speeds up diagnostic model creation by 20 times . Once their models are set up, data can be automatically processed and sent to information dashboards . 

Alteryx has also integrated with different cloud servers, like AWS, Azure, and Snowflake. With all of these features and more, it's no wonder Alteryx's core product is popular among its 7,405 customers. 

Their flagship software, Alteryx Designer, has an average rating of 4.7 stars out of 5 on Gartner . Nearly every one of these reviews includes comments about how the product changed the way their company does business. Designer is useful for companies of all sizes, with massive operations such as Coca-Cola (KO 0.82%) and Walmart (WMT 0.06%) utilizing Alteryx's product as well as not-for-profit entities like AAA or the University of Dayton . 

Alteryx innovates among little competition

Opposition is fairly light for Alteryx as well. In their last annual filing, they noted the fact that their biggest competitor at the moment is manual spreadsheets. New entrants are always a threat in any industry, but without much current contention, Alteryx is free to focus on its own development. 

In 2020, they released two new solutions, Analytics Hub and Intelligence Suite. Analytics Hub allows data scientists and analysts from across the customer's company to work together and discover potential solutions their colleagues have come up with already. For example, two employees who have never met one another could utilize each other's work by searching their business's Analytics Hub. This prevents wasted time and resources by having predeveloped solutions for many data scientists to utilize. Intelligence Suite incorporates machine learning and text mining to help Alteryx Designer better process unstructured data. As Alteryx expands its library of products, it demonstrates the innovation and optionality that all successful companies exhibit. 

What's in store for the future?

While Alteryx is only guiding for a disappointing 6% revenue growth for the fiscal year 2021, its annual recurring revenue is expected to grow by nearly 30%. This is the key metric to watch, as this is sustainable revenue. Its dollar-based net expansion rate was 130% this past quarter and this number has not dipped past 125% in the last 2 years. Clearly, companies that stick with Alteryx's product suite find enough value in it to spend more each year. 

Currently, Alteryx is not consistently profitable, so the price-to-earnings metric is not of much use. The price-to-sales ratio is currently hovering below 10, making it an extremely low valued tech stock compared to high fliers such as Datadog (DDOG 1.92%) or Crowdstrike (CRWD 1.71%) that trade near 50. With a relatively low valuation and strong recurring revenue growth ahead, Alteryx seems like a smart place to put your money.