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Workday Has a Great Environment to Work In

Stock (Symbol)

Workday (WDAY)

Stock Price

$114

Sector
Technology
Data is as of
January 11, 2018
Expected to Report
Feb 26
Company Description
Workday, Inc. is a provider of enterprise cloud applications for finance and human resources. The Company delivers financial management, human capital management and analytics applications designed for various companies, educational institutions and government agencies. As part of its applications, the Company provides embedded analytics that capture the content and context of everyday business events, facilitating informed decision-making from wherever users are working. Source: Thomson Financial
Sharek’s Take
David SharekWorkday (WDAY) software unifies company’s human resources and financial data into one program on the cloud so management can see what regions or line of business money is coming in from, click to see which salesmen are delivering the most sales, then jump to view the payroll section. The software is on the cloud, so all this can be done from multiple offices, on the road, or even a coffee shop. Workday has some heavy hitters as clients such as Netflix, Amazon, Bank of America, Adobe, and AirBnb. It added Humana, Qualcomm and Nordstrom two qtrs ago and more recently signed up Lowe’s and M&T Bank. Still, there’s great growth opportunity both here and abroad. Last qtr WDAY had 40% sales growth, but 75% of sales were from the U.S. Sales growth was % here and % abroad. There’s a lot of large corporations all around the world that could use this service, thus I feel this stock should be held for the long-term. But — there’s a big but here — WDAY has a P/E of around 100. The company invests to grow thus profits are low (and losses money if you use GAAP, which I don’t).  In fiscal 2016 Workday spent 43% of sales on research and development. WDAY’s Estimated Long Term Growth Rate is a sparkling 108%, making it is one of the fastest growing growth stocks in the stock market, for those who search for Est. LTG (like computers). I think the key with this stock’s ability to keep climbing lies in beating the street. During the last three qtrs WDAY beaten a $0.16 estimate by thirteen cents, and two $0.15 estimates by 9 cents. We as investors are banking on continued rapid growth, if growth were to slow that might derail the stock. But with the economy surging and companies expanding, WDAY has a great environment to work in.
One Year Chart
Here’s something you haven’t heard. WDAY delivered profits (or losses) of-$0.01, $0.05, -$0.04 and $0.03 before cranking that up to $0.20, $0.29, $0.24 and $0.24 the last few qtrs. So the percentage profit growth has been easy the last 4 qtrs. Now qtrly Estimates are for 186%, 0%17% and 21% profit growth the next 4 qtrs. So WDAY needs to keep beating to keep profit growth strong. A 98 P/E can be had when profits are growing in the triple-digits, but if profit growth were slow to below 50% I would become more cautious and lower my Fair Value P/E.
Fair Value
This company just started delivering profits in 2016. And the stock is so high in anticipation of future profits that the P/E has been enormous. This stock is tough to value using traditional analysis, I think it’s better to look at a Salesforce valuation model, which is growth is good  and if you don’t own the stock when its new you could get left behind.
Bottom Line
Workday an exceptional software because some of the more technologically advanced companies in the world are choosing it. This company is a young up-and-comer that’s working in a great economy. Sales just rose 40%, business is great. WDAY ranks 10th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.
Power Rankings
Growth Stock Portfolio

10 of 39

Aggressive Growth Portfolio

10 of 16

Conservative Stock Portfolio

N/A

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