Red flags appear when a firm sacrifices profitability to join the cloud and transitions to a business model with negative margins. Add in significant competition and an overvalued stock price and investors should be running for the hills.
This week’s Danger Zone pick is a company that touts 61 consecutive quarters of revenue growth despite five years of shareholder value destruction. Increased competition, misleading non-GAAP metrics, and an overly optimistic valuation land SPS Commerce (SPSC) in the Danger Zone.
Many investors saw the recent price decline as a time to buy, and the stock is up 30% since mid-May. With shares now greatly overvalued plus large profit losses and strong competition, FireEye (FEYE) is this week’s Danger Zone pick.
This week’s Danger Zone pick has since rebounded and might have investors thinking now is the time to buy. Unfortunately, the fundamentals of this company reveal a different story. Growing losses, misleading non-GAAP metrics, and significant competition land Imperva Inc. (IMPV) in the Danger Zone this week.
Companies with long histories of profit losses often attempt to sell investors on their plans to “reach scale.” But, what happens when a company reaches scale and profits remain elusive? Profitless since going public, Cornerstone OnDemand (CSOD) lands in the Danger Zone this week.
Thesis: Management can boost the market value of ORCL in the amounts provided by aligning the firm’s strategy and performance compensation with real cash flows or what we call return on invested capital.
This week’s Danger Zone hones in on another IPO from 2015 that may have been one of the last to capitalize on the easy money in the market. Post IPO, we believe it won’t take long for investors to realize this company is bleeding cash, has no profits, and faces stiff competition moving forward.
Despite deteriorating margins, lack of competitive advantage, and a sky-high valuation, Qlik Technologies (QLIK: $31/share) is up nearly 33% over the past two years and finds itself in the Danger Zone this week.
Just when we think the market is becoming more rational and beginning to focus on fundamentals again we find a stock that proves that idea wrong. Once again, we’ve identified a business that fails to generate profits, uses “adjusted” metrics as “better representations of business”, and who’s stock price is up over 200% since late 2012. ServiceNow (NOW) is in the Danger Zone this week.
At the beginning of the fourth quarter of 2015, only the Large Cap Value and Large Cap Blend styles earn an Attractive-or-better rating.
This week we’ve identified another highflying cloud company that exhibits many of the problematic traits we saw in DWRE and SPLK. Revenue growth can only support a stock for so long and this week’s Danger Zone stock, Marketo (MKTO) has plenty of room to fall.
The All Cap Growth style ranks sixth out of the 12 fund styles as detailed in our 3Q15 Style Ratings for ETFs and Mutual Funds report. It gets our Neutral rating
In early 2012, Splunk Inc. burst onto the scene with one of the biggest IPOs of the year. Since then, the stock price has ridden the hype and is up more than 320%. This price increase should raise serious concerns for astute investors.
Demandware IPO’d in 2012 based on plans to create shareholder value by providing e-commerce platforms for retailers and brands worldwide. So far, the plan is not working as the company’s profits have declined. Paradoxically, the stock price has climbed over 140% since its IPO. The stock is dangerously overvalued and earns a place in the Danger Zone this week.
Barron’s featured New Constructs for the eighth time this past weekend.
The All Cap Growth style ranks fourth out of the twelve fund styles as detailed in my Style Rankings for ETFs and Mutual Funds report.
Finding the best ETFs is an increasingly difficult task in a world with so many to choose from.
No fund style earns better than my Neutral rating going into 2Q14.
Momentum was the only thing supporting WDAY’s stock, and now that the momentum is gone, look out below.
The Information Technology sector ranks third out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report.
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