Stock (Symbol) |
Clearwater Analytics (CWAN) |
Stock Price |
$23 |
Sector |
| Financial |
Data is as of |
| August 6, 2024 |
Expected to Report |
| October 30 |
Company Description |
 Clearwater Analytics Holdings, Inc. is a provider of software-as-a-service (SaaS)-based investment management, accounting, reporting, and analytics solutions.
With a single instance, multi-tenant architecture, the Company offers investment portfolio planning, performance reporting, data aggregation, reconciliation, accounting, compliance, risk, and order management. Its cloud-native software allows clients to radically simplify their investment accounting operations, enabling them to focus on higher-value business functions, such as asset allocation strategy and investment selection. Its platform provides comprehensive accounting, data, and advanced analytics as well as highly configurable reporting for global investment assets daily or on-demand, instead of weekly or monthly. Its software automates data aggregation, data reconciliation, data validation, and trade management of each security in its client’s investment portfolios. It serves a broad universe of institutional clients. |
Sharek’s Take |
 Clearwater Analytics (CWAN) is software that provides investment accounting for asset management firms. Clearwater is tone “new guy” in the field of accounting for companies that manage stock portfolios, bond portfolios, and especially alternative assets, which are often difficult to fairly value on a daily basis. Alternative assets have gained in popularity since the 2008 stock market correction. CWAN stock just broke out to a 52-week high earlier this month after the company announced earnings of 25% that met analyst estimates. Management upped revenue guidance a little, which impressed investors.
Clearwater Analytics provides investment accounting software to asset managers, insurance companies and large corporations. Clearwater’s platform performs accounting, reporting,trader management, analytics and performance measurement. Management says it brings modern software to an industry with difficult to use and expensive legacy technologies that often take significant manual intervention. The cloud based software aggregates data from greater than 4100 daily feeds and more than 4 million securities to provide clients with a comprehensive view of their holdings and performance. Fees are billed based on the amount of assets and complexity of the accounting, and begin with a based fee based on an existing book of business plus an incremental fee for increases in assets on the platform, thus CWAN’s revenues with changes in asset prices, but a majority of assets on the platform are high-grade bonds with lower levels of volatility. CWAN claims a 80% win rate on new client proposals since 2018. Annual recurring revenue has grown 23% a year since 2016:
I like software stocks, especially asset management software. Clearwater Analytics is a smaller, faster growing company than Factset and SS&C Technologies. Analysts give CWAN stock an Estimated Long-Term Growth Rate of 20% a year, and they also think revenue will grow 20% next qtr. Profits grew 25% last qtr. I feel this is a 25%-plus grower long-term. CWAN might be added to the Growth Portfolio soon, but the P/E is a high 54 after the recent breakout. |
One Year Chart |
 Note these charts and tables are from 8/6 when the stock was $23. I’ve been waiting for a better entry point as the P/E of 54 is quite high. Today, 8/27, the shares are $24.
The Est. LTG is 20%. Qtrly profit growth has been very good, but did just slow from 43% to 25%. |
Earnings Table |
 Last qtr, Clearwater delivered 25% profit growth which met analyst estimates. Revenue grew 19%. Note prior to last qtr profits were growing at a 40%-plus rate.
Last qtr the company completed the acquisition of Wilshire Advisors’ Risk and Performance Analytics software. Wilshire Advisors is a financial services firm, and Clearwater is acquiring its software for stock analytics, bond analytics, accounting, and performance measurement. CWAN management stated last quarter’s cash flow was enough to pay for this acquisition. Annual Profit Estimates are slim. Profits are expected to climb 30% this year. Qtrly profit estimates are for 22%, 20%, 20%, and 30% profit growth in the next 4 qtrs. For next qtr, analysts expect revenue to grow 20%. |
Fair Value |
 My Fair Value is a P/E of 35. But the P/E is 54 this quarter.
I would like to own this stock, but feel the shares are pricey right now. |
Bottom Line |
 Clearwater Analytics (CWAN) is a recent IPO from September 2021. The stock has just broken out of a long back-and-forth pattern, and is aiming to go higher.
CWAN’s high P/E might be the only thing I don’t like about this stock. I like that revenue grows consistently each quarter. CWAN is on the radar for the Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
