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Category: Stock Market and Workday
Date: 4 December 2019 Stock Price: $173.50 We take a look at the 3rd quarter of their 2020 fiscal year earnings report of Workday a company providing enterprise cloud applications for finance and human resources.
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About Workday
Workday is a leading provider of enterprise cloud applications for finance and human resources. Founded in 2005, Workday delivers financial management, human capital management, planning, and analytics applications designed for the world’s largest companies, educational institutions, and government agencies. Organizations ranging from medium-sized businesses to Fortune 50 enterprises have selected Workday.
Overview of Workday's 3rd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Net sales: $938.1 million (up from $743.189 million for the same quarter in the previous year)
- Net sales increased by 26.2% over the last 12 months
- Costs and expenses: $1.048 billion (down from $925.944 million for the same quarter in the previous year)
- Costs and expenses increased by 13.1% over the last 12 months
- Net loss: -$115.729 million (up from -$153.551 million for the same quarter in the previous year)
- Diluted loss per share: -$0.51 (up from -$0.70 for the same quarter in the previous year)
- Diluted number of shares in issue: 228.461 million (up from 217.694 million for the same quarter of the previous year)
- Cash and equivalents: $912.784 million
- Cash and equivalents per share: $3.99
- Cash and equivalents makes up 2.3% of Workday's current market capital
- Cash and equivalents makes up 14.8% of Workday's total assets
- Trade and other receivables: $615.508 million
- Trade and receivables makes up 9.99% of Workday's total assets
- Stockholders equity in Workday: $2.319 billion
- Stockholders equity per share in Workday: $10.15
- Workday is trading at 17.1 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- Cash generated from operations: $255 million
- Cash generated from operations per share: $1.11
Workday's management commentary on their 3rd quarter 2020 earnings
PLEASANTON, Calif., Dec. 03, 2019 (GLOBE NEWSWIRE) -- Workday, Inc. (NASDAQ: WDAY), a leader in enterprise cloud applications for finance and human resources, today announced results for the fiscal 2020 third quarter ended October 31, 2019.
"Companies of all sizes and industries continue to select Workday, and we’re thrilled that as of the end of Q3, we have more than 3,000 customers and 42 million users,” said Aneel Bhusri, co-founder and CEO, Workday. “As our community grows, so do our applications. We recently announced plans to deepen our offering for the office of finance with the intended acquisition of Scout RFP. We also unveiled several ways our customers can leverage leading machine learning capabilities that are powering our applications – helping them to make more informed decisions as they navigate this changing world of work.”
“We executed well in the third quarter and delivered strong results, with subscription revenue growth of 28% and non-GAAP operating margin of 15%,” said Robynne Sisco, co-president and chief financial officer, Workday. “We are well positioned as we enter our seasonally strongest quarter, and we are raising our fiscal 2020 subscription revenue outlook to $3.085 billion to $3.087 billion. We expect fourth-quarter subscription revenue of $828.0 million to $830.0 million. Our focus remains on driving durable growth, while also progressing towards our longer-term margin goals.”
"Companies of all sizes and industries continue to select Workday, and we’re thrilled that as of the end of Q3, we have more than 3,000 customers and 42 million users,” said Aneel Bhusri, co-founder and CEO, Workday. “As our community grows, so do our applications. We recently announced plans to deepen our offering for the office of finance with the intended acquisition of Scout RFP. We also unveiled several ways our customers can leverage leading machine learning capabilities that are powering our applications – helping them to make more informed decisions as they navigate this changing world of work.”
“We executed well in the third quarter and delivered strong results, with subscription revenue growth of 28% and non-GAAP operating margin of 15%,” said Robynne Sisco, co-president and chief financial officer, Workday. “We are well positioned as we enter our seasonally strongest quarter, and we are raising our fiscal 2020 subscription revenue outlook to $3.085 billion to $3.087 billion. We expect fourth-quarter subscription revenue of $828.0 million to $830.0 million. Our focus remains on driving durable growth, while also progressing towards our longer-term margin goals.”
Workday announced leadership changes, including the appointment of Leighanne Levensaler to chief marketing officer and executive vice president of corporate strategy. In addition, Workday promoted Emily McEvilly to the new role of chief customer officer and welcomed Rich Sauer as its new executive vice president, general counsel, and corporate secretary.
Workday (NASDAQ: WDAY) stock price history
The image below, obtained from Google, shows the stock price history of Workday over the last 5 years. And its been a pretty volatile but largely positive time for Workday stockholders The group's stock traded at around $83.40 a stock 5 years ago and is currently trading at $173.50 a stock. That's a significant return of 108% provided to Workday stockholders over the last 5 years.
Workday stock is trading at a lot closer to its 52 week low of $141.70 than it is to its 52 week high of $226.83 which to us is a clear indication that the short term momentum and sentiment of Workday's stock is negative.
Workday stock is trading at a lot closer to its 52 week low of $141.70 than it is to its 52 week high of $226.83 which to us is a clear indication that the short term momentum and sentiment of Workday's stock is negative.
Recent coverage of Workday
The extract below discusses the latest regarding Workday as obtained from TheStreet.com
Workday (WDAY) - Get Report has delivered poor performance in 2019, growing just 7% compared with the S&P 500, which is up 24% over the same time frame. Why? Arguably because investors are starting to look beneath the surface and question whether a "growth at any cost" enterprise like Workday makes for a suitable investment. Prudent investors would do well to avoid Workday's stock. Here's why:
The Ever-Alluring Narrative
Workday has all the makings of a strong Software-as-a-Service (SaaS) company. In fact, Workday CEO Aneel Bhusri reminds the investment community that not only does Workday derive 75% of its revenues from North America, but that Workday's Human Capital Management (HCM) Suite is being used by half of Fortune 100 companies, demonstrating strong validation of its platform. at's more, its land-and-expand strategy continues to see high customers' satisfaction has reflected in its plus 100% net retention rates, given that 45% of new customers make add-on purchases within the first year of their go-live dates.
Furthermore, to the delight of shareholders, Workday's recurring revenues account for approximately 85% of its total revenue. Having said that, at this juncture, some questions begin to surface. In the graph below we can see Workday's revenue growth rates.
Read the full article here
Workday (WDAY) - Get Report has delivered poor performance in 2019, growing just 7% compared with the S&P 500, which is up 24% over the same time frame. Why? Arguably because investors are starting to look beneath the surface and question whether a "growth at any cost" enterprise like Workday makes for a suitable investment. Prudent investors would do well to avoid Workday's stock. Here's why:
The Ever-Alluring Narrative
Workday has all the makings of a strong Software-as-a-Service (SaaS) company. In fact, Workday CEO Aneel Bhusri reminds the investment community that not only does Workday derive 75% of its revenues from North America, but that Workday's Human Capital Management (HCM) Suite is being used by half of Fortune 100 companies, demonstrating strong validation of its platform. at's more, its land-and-expand strategy continues to see high customers' satisfaction has reflected in its plus 100% net retention rates, given that 45% of new customers make add-on purchases within the first year of their go-live dates.
Furthermore, to the delight of shareholders, Workday's recurring revenues account for approximately 85% of its total revenue. Having said that, at this juncture, some questions begin to surface. In the graph below we can see Workday's revenue growth rates.
Read the full article here
Workday (NASDAQ: WDAY) latest stock valuation
So what do we value Workday stock at based on their latest earnings release? It is hard to value a loss making firm as the earnings per share cannot be used as a base for a valuation. Our standard fall back would be to use the stockholders equity per share as the basis for our valuation. Which in Workday's case is $10.15
We used their cash generated from operations as a base for our valuation of Workday. And based on Workday's latest earnings report our valuation model provides a target price (full value price) for Workday stock at $66.70 a stock. We therefore believe the stock of Workday is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $66.70. A good entry point into Workday would therefore be at $60 or below.
We expect the stock of Workday to pull back from its current price in coming weeks and months to levels closer to our target price (full value) price.
We used their cash generated from operations as a base for our valuation of Workday. And based on Workday's latest earnings report our valuation model provides a target price (full value price) for Workday stock at $66.70 a stock. We therefore believe the stock of Workday is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $66.70. A good entry point into Workday would therefore be at $60 or below.
We expect the stock of Workday to pull back from its current price in coming weeks and months to levels closer to our target price (full value) price.
Next earnings release of Workday
It is expected that Workday will release their 4th quarter and full fiscal 2020 earnings report in late February 2020