Cvent (NYSE:CVT) oversees a cloud-based event management software capitalizing on what turns out to be a global industry that cycles more than $550 billion (with a b) each year. Cvent has fallen out of favor with the market since its IPO last August -- the stock has dropped more than 22% so far this year -- but here are five reasons you should add the company to your watchlist:
Founder and CEO Reggie Aggarwal has a zest for this business that is evident in any of his interviews. Cvent was started in 1999, survived the burst of the tech bubble (barely), and now brings in more than $100 million of revenue each year and counting.
"We still remember the bad times," says Aggarwal, "and we're always going to think like a start-up, which is don't get arrogant, treasure your customers, treasure your employees, and be frugal."
Aggarwal is surrounded by an experienced management team, many of whom have been with the company since its founding in 1999. Chief technology officer David Quattrone, chief information officer Dwayne Sye, and executive vice president Charles Ghoorah have been with Cvent since 1999. Senior vice president Brian Ludwig has been with Cvent since 2000.
2. Sales growth
Cvent has capitalized on its growing niche in field of event management, with sales expanding at an average annual rate of 25.32% since 2010 to $111.14 million in 2013. In the first quarter of 2014 sales grew 28.9% year-over-year.
3. Company culture
Aggarwal's passion for the business has translated not only into a growing business, but a strong company culture as well. As CEO, Aggarwal receives an employee approval rating of 80% on Glassdoor, a site where employees anonymously rate their place of work. Cvent as a whole earns a 3.6/5 rating from employees.
4. Free cash flow production
Cvent is solidly free cash flow positive, meaning the company produces more operating cash flow than capital expenditures. Cvent has been free cash flow positive the past three fiscal years and produced $10.72 million in free cash flow in 2013. In the first quarter of 2014 free cash flow increased 22.45% year-over-year to $18.71 million.
This free cash flow production has helped the company build an arsenal of $201.66 million in cash with no debt. The IPO last year also added a good deal of cash, but the business continues to produce cash that is added to the balance sheet.
Over the past four years Cvent's R&D spending increased 5 times to $11.19 million in 2013. As Cvent enters the stage as a public company, Aggarwal says the company is especially focusing on innovations in the mobile field as well as expanding on a global scale. These significant opportunities -- and management's focus on continued innovation -- give me confidence in Cvent's long-term growth prospects.
Foolish bottom line
Cvent is a company investors should watch closely. It isn't often that you find experienced leadership, an innovative culture, and strong cash flow generation all within one business.
Cvent currently trades at a price-to-sales ratio of 9, so the stock will likely be volatile in the short-term. However, should the company's growth continue, Cvent can likely grow into its valuation over the long haul while outperforming the market in the process.
David Kretzmann has no position in any stocks mentioned. You can follow David on his Foolish discussion board, Pencils Palace, on CAPS, or on Twitter @David_Kretzmann. Learn more about David's Pencils IRA Project at Fool.com. The Motley Fool recommends Cvent. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.