As Smartsheet (SMAR) readies its quarterly earnings unveiling, its proactive steps in expanding services and market presence, coupled with significant recent milestones, raise a pivotal question: Does this momentum signal a buy, hold, or sell for its shares? Read more to find out….
The enterprise work management platform Smartsheet Inc. (SMAR) is set to disclose its fiscal 2024 fourth-quarter earnings on March 14. Analysts anticipate a 20.5% year-over-year revenue growth to $255.86 million. Additionally, the company’s EPS for the same period is projected to surge 159% from the previous year’s quarter to $0.18.
Moreover, in its fiscal third quarter release, SMAR projected total revenue for the fourth quarter of fiscal 2024 at $254-$256 million, anticipating 20-21% year-over-year growth, with non-GAAP operating income of $21-$23 million and non-GAAP net income per share of $0.17-$0.19.
For the entire fiscal year 2024, the company forecasted revenue at $955-$957 million, indicating a 25% year-over-year increase, with non-GAAP operating income projected at $82-$84 million and non-GAAP net income per share at $0.68-$0.69.
Mark Mader, CEO of SMAR, expressed, “We exceeded expectations on the top and bottom lines this quarter. Our enterprise customers are operating more durable, more mission-critical solutions on the Smartsheet platform than ever before. We remain focused on bringing our latest innovations to the market so new and existing customers can fully capitalize on our enterprise leading platform.”
Furthermore, on January 17, 2024, SMAR announced achieving $1 billion in Annualized Recurring Revenue (ARR) in the fourth quarter, a significant milestone following its recognition as a Leader in the December 2023 Gartner® Magic Quadrant™ for Collaborative Work Management.
Presently, SMAR empowers mission-critical operations securely and reliably at scale for numerous organizations globally, including approximately 85% of the 2023 Fortune 500 companies. Mark commented, “Crossing this financial threshold of $1 billion in ARR is meaningful, but at the same time should be recognized as another marker along the way.”
Shares of SMAR have gained 5.3% over the past year, closing the last trading session at $41.85.
Here are the fundamental aspects of SMAR that could influence its price performance in the near term:
Latest Developments
On October 23, 2023, SMAR introduced its latest Smartsheet Region in Australia, reinforcing its commitment to enhancing service for its expanding Asia-Pacific-Japan (APJ) clientele. Smartsheet Regions, distributed globally, facilitate compliance with data residency regulations, granting organizations the flexibility to select hosting and processing locations.
The Australian Smartsheet Region will serve both new and existing APJ customers, operating across multiple sites to ensure redundancy. The configuration ensures enterprise-level availability and scalability, positioning SMAR for accelerated growth and expansion in the APJ market while enhancing its reputation for reliability and customer-centric solutions.
On September 19, 2023, SMAR introduced its next-generation Smartsheet platform, showcasing novel product capabilities that empower advanced solution development, AI-driven data insights, and extensive scalability. From establishing healthcare clinics to overseeing acquisitions or executing marketing campaigns with tens of thousands of concurrent projects, SMAR aids customers in handling increasingly intricate and mission-critical tasks.
The innovative leap would enhance SMAR’s value proposition and fortify its competitive edge, attracting a broader clientele and fostering sustained growth and market expansion.
Solid Financials
During the third quarter of fiscal 2024, which ended October 31, 2023, SMAR’s total revenue increased 23.2% year-over-year to $245.92 million. Its non-GAAP operating income came in at $19.36 million, compared to an operating loss of $4.31 million in the previous year’s quarter.
Furthermore, the company’s non-GAAP net income and non-GAAP net income per share stood at $22.59 million and $0.16, compared to a net loss and loss per share of $1.89 million and $0.01, respectively, in the prior year’s period.
Sound Historical Growth
Over the past three years, SMAR’s revenue increased at a CAGR of 37.2%. Its tangible book value grew at a 3.7% CAGR during the period. Moreover, the company’s total assets and levered free cash flow rose at CAGRs of 13.1% and 96.4%, respectively, over the same time frame.
Optimistic Analyst Estimates
The consensus revenue estimate of $1.14 billion for the fiscal year ending January 2025 reflects a 19.4% year-over-year increase. Likewise, the company’s EPS for the same period is expected to grow 35.8% from the previous year to $0.93. Moreover, the company topped the consensus revenue estimates in all four trailing quarters.
Robust Profitability
The stock’s trailing-12-month gross profit margin and trailing-12-month levered FCF margin of 79.79% and 26.69% are 62.6% and 197.8% higher than the industry averages of 49.08% and 8.96%, respectively. Moreover, the company’s trailing-12-month asset turnover ratio of 0.82x is 34.9% higher than the 0.61x industry average.
POWR Ratings Exhibit Sound Prospects
SMAR’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. SMAR holds a B grade for Growth, reflecting its strong historical growth performance. Furthermore, the stock earns a B grade for Quality, which is consistent with its impressive profitability metrics.
SMAR is ranked #9 out of 19 within the B-rated Software – SAAS industry. Click here to access SMAR’s Value, Momentum, Stability, and Sentiment ratings.
Bottom Line
SMAR is poised for growth driven by its innovative product capabilities and expansion strategies. The introduction of its Smartsheet Region in Australia and the unveiling of its next-generation platform demonstrate its commitment to enhancing services and catering to a broader clientele, positioning the company for accelerated market expansion.
Additionally, SMAR could make an ideal buy right now owing to its solid financial performance in the most recent quarter, optimistic analyst estimates, and robust profitability metrics. Furthermore, with strong historical growth, SMAR stands out in the software industry, offering the potential for long-term value appreciation.
How Does Smartsheet Inc. (SMAR) Stack Up Against Its Peers?
While SMAR has an overall grade of B, equating to a Buy rating, you may check out these A (Strong Buy) rated stocks within the Software – SAAS industry: DocuSign, Inc. (DOCU), Informatica Inc. (INFA) and Vimeo, Inc. (VMEO). To explore more Software – SAAS stocks, click here.
What To Do Next?
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SMAR shares were unchanged in premarket trading Tuesday. Year-to-date, SMAR has declined -12.48%, versus a 7.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal’s passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor’s degree in finance and is pursuing the CFA program.
She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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