Stock (Symbol) |
Workday (WDAY) |
Stock Price |
$125 |
Sector |
| Technology |
Data is as of |
| April 30, 2018 |
Expected to Report |
| May 30 |
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 |
 Workday’s (WDAY) profit growth rate is expected to drop from a triple-digit rate to a negative rate. That could be bad news for the stock. But honestly, WDAY doesn’t really trade on earnings or a P/E. Investors buy WDAY stock because of the potential it has. The company invests to grow thus profits are low (and it losses money if you use GAAP, which I don’t). Workday’s 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, including 175 of the Fortune 500 including Netflix, Amazon, Bank of America, Adobe, and AirBnb. New additions include Home Depot, GE, PNC Bank and Chevron USA. Still, there’s great growth opportunity both here and abroad, International clients were just 22% of sales last qtr. 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. WDAY’s profit growth rate is expected to drop from 758% last year to 17% this year. But growth last year was easy due to easy comparisons vs. 2016 ($1.03 vs. $0.12). Also, Workday beat the street by a total of 39 cents the last 4 qtrs. If I add $0.39 to 2018’s estimate of $1.21 that would be 55% profit growth for 2018 (hypothetically). Workday’s software is becoming an integral partner for large corporations, and with sales still growing strong (+33% last qtr) this stock might “hang in there”. But slower growth is hard to swallow when you’re P/E is 100. WDAY is one of the next great franchises and those companies often have great stocks. So I’m fine with WDAY for now, but may trim my position in the coming months. |
One Year Chart |
 WDAY reported a profit of $0.28 last qtr which beat estimates of $0.20. In the year-ago period the company made $0.07. Profit growth of 300% beat estimates of 186%. Qtrly Estimates are for -10%, +8%, 33% and 32% profit growth the next 4 qtrs. Also, WDAY has beaten the street in each of the last 4 qtrs so the company could come in better than expected in the future. The P/E of 100 is OK for now, but if the stock declines on high volume I will have to reassess. The Est. LTG of 44% a year is outstanding. |
Fair Value |
 2018 estimates rose from $1.16 last qtr to $1.21 this qtr. That’s not much as we are dealing with a lower tax rate this qtr. I’ll keep my Fair Value at 100x earnings for now, which means the stock is at my 2018 price target. There’s still good upside when we look out to 2019. But really, this is all hypothetical at this point. I feel like I’m guessing with my P/E and valuation here. |
Bottom Line |
 Workday an exceptional software because some of the more technologically advanced companies in the world are choosing it. This is one of the new great franchises and franchise names often have great stocks. Still, there’s some things I’m concerned about this qtr, which means this stock isn’t perfect. WDAY ranks 12th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. I took it down some in my Power Rankings, but the long-term potential is so good here I couldn’t drop it too much. |
Power Rankings |
Growth Stock Portfolio
12 of 40Aggressive Growth Portfolio 12 of 20Conservative Stock Portfolio N/A |
