Workday vs. Box: Which Cloud Stock is a Better Buy?

NYSE: BOX | Box, Inc.  News, Ratings, and Charts

BOX – The cloud computing industry is expected to grow substantially in the coming months, driven primarily by continued adoption of hybrid working models. Two major players in this industry—Workday (WDAY) and BOX (BOX)—are expected to benefit from the industry’s growth. But which of these two stocks is a better buy now? Let’s find out.

Workday, Inc. (WDAY) and Box, Inc. (BOX) are two established players in the new-age cloud space. WDAY provides enterprise cloud applications worldwide and caters to industries such as financial services and technology. BOX provides a cloud-based content management platform that enables organizations to manage their content easily and securely from anywhere on any device.

The cloud computing industry is expected to reach new heights soon driven by the commercialization of 5G and increased adoption of hybrid working models by organizations. Because major industries are investing heavily in developing digital infrastructure, the demand for cloud computing is expected to increase in the coming months. According to dinCloud, the cloud computing market is expected to grow at a  17.9% CAGR over the next four years. Consequently, WDAY and BOX could see increasing demand for their product and services.

While WDAY has gained 43.6% over the past year, BOX has returned 35.6%. However, in terms of past nine months’ performance, BOX is a clear winner with 29.8% returns versus WDAY’s 18.2%. But which of these two stocks is a better pick now? Let’s find out.

Click here to check out our Cloud Computing Industry Report for 2021

Latest Movements

In April, WDAY unveiled new capabilities in Workday Extend, which is a solution that helps customers and partners seamlessly extend beyond core applications to meet unique business needs. New orchestration, data, and logic capabilities within Workday Extend might help organizations advance their digital acceleration efforts and hence increase WDAY’s  revenue.

Meanwhile, earlier this month, BOX expanded its partnership with Cisco Systems, Inc.’s (CSCO) Cisco Webex and announced new and deepened integrations between the two technology platforms to make it easier for consumers to work securely and effectively in the cloud. This is expected to increase the company’s consumer base.

Recent Financial Results

WDAY’s revenue increased 19.8% year-over-year to $1.01 billion for the fourth quarter ended January 31. The company’s operating loss came in at $73.31 million compared to a $146.10 million loss  in the prior-year period. Its net loss came in at $71.71 million compared to a $128 million loss in the year-ago period.

For the fourth quarter, ended January 31,  BOX’s sales came in at $198.91 million, which represents an 8.4% increase from the prior-year quarter. The company’s gross profit increased 10.6% from the same period last year to $140.32 million. Its net loss for the quarter came in at $4.94 million compared to a $30.40 million loss in the prior-year period.

Past and Expected Financial Performance

WDAY’s revenue has increased at a 26.3% CAGR over the past three years. Its annual revenue is expected to increase 15.6% in its fiscal year 2022 and 18.4% in 2023. The company’s EPS is expected to grow 65.9% for the about-to-be-reported quarter, ended April 30, 2021, and 23.8% in 2023. Also, WDAY’s EPS is expected to grow at a rate of nearly 13% per annum over the next five years.

In comparison, BOX’s revenue has increased at a 15.1% CAGR over the past five years. Analysts expect the company’s annual revenue to increase 9.6% in its fiscal year 2022 and 10.1% in  2023. Its EPS is expected to grow 70% for the about-to-be-reported quarter, ended April 30,  and 26.2% in its fiscal year 2023. Furthermore, its EPS is expected to grow at an 8% rate  per annum over the next five years.

Profitability

WDAY’s $4.32 billion trailing-12-month revenue is much higher than BOX’s $770.77 million. WDAY is slightly more profitable with a 72.65%  gross profit margin versus BOX’s 70.84%.

However, BOX’s 3.68% EBITDA margin compares favorably to WDAY’s 2.87%.

Valuation

In terms of forward EV/Sales, WDAY is currently trading at 10.78x, 58% higher than BOX’s 4.53x. And in terms of forward EV/EBITDA, WDAY’s 46.04x is 62.1% higher than BOX’s 17.44x.

So, BOX is the more affordable stock.

POWR Ratings

BOX has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. However, WDAY has an overall C rating, which represents Neutral.

Both WDAY and BOX have a B grade for Growth, consistent with analysts’ expectations that their EPS and revenue will increase in the coming months.

However, WDAY has a C grade for Value. This is justified because  its 46.05x forward Price-to-Cash Flow is 112.8% higher than the 21.64x industry average. BOX has a B grade for Value. This is in sync with the company’s 5.22x forward Price-to-Cash Flow, which is 75.9% lower than the 21.64x industry average.

Of 125 stocks in the Software-Application industry, WDAY is ranked #29. BOX is ranked #6 of 72 stocks in the Technology-Services industry.

In addition to the POWR Ratings grades we’ve just highlighted, we’ve rated both BOX and WDAY for Quality, Momentum, Sentiment and Stability. Click here to see the additional ratings for BOX. Also, get all WDAY’s ratings here.

The Winner

The demand for cloud-based services is  expected to be high in the near- to mid- term owing to the ongoing rapid digital transformation. While both WDAY and BOX are expected to benefit from the industry tailwinds, BOX seems to be a better buy now because  its valuation is more in sync with its near-term growth prospects.

Our research shows that the odds of success increase if one  bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about top-rated stocks in the Software-Application industry. Also, click here to see other top-rated stocks in the Technology-Services industry.

Click here to check out our Cloud Computing Industry Report for 2021


BOX shares were trading at $23.42 per share on Thursday afternoon, up $0.24 (+1.04%). Year-to-date, BOX has gained 29.75%, versus a 11.49% rise in the benchmark S&P 500 index during the same period.


About the Author: Ananyo Guha Niyogi


Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
BOXGet RatingGet RatingGet Rating
WDAYGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Updated 2024 Stock Market Outlook

The bull market continues to rage on with the S&P 500 (SPY) making new highs. That is the past...the question is what does the future hold? That is why 44 year investment veteran Steve Reitmeister provides this updated 2024 Stock Market Outlook to help you carve a path to outperformance the rest of the year. Read on below for the full story...

Top 4 Tech Giants Poised for Explosive Growth

Fueled by the ever-growing demand for advanced technological solutions across various sectors and ongoing innovation, the tech industry has robust growth prospects. Thus, it could be wise to invest in top tech stocks Dropbox (DBX), TTM Technologies (TTMI), Lantronix (LTRX) and AstroNova (ALOT) for potential growth. Continue reading…

3 Top Rated Software Stocks to Streamline Your Investments

The software industry is thriving with soaring demand, presenting ample investment opportunities. So, fundamentally solid software stocks ServiceNow (NOW), Autodesk (ADSK), and Docebo (DCBO) might be ideal buys for promising returns. Read on...

Biotech Investors: Should You Buy, Hold, or Sell Moderna (MRNA) and Arrowhead Pharmaceuticals (ARWR)?

Despite facing several challenges, the biotech sector thrives due to growing demand for effective treatments, consistent innovations, and a sustained demand for high-quality drugs and therapies. Let's assess whether one should Buy, Hold, or Sell biotech stocks Moderna (MRNA) and Arrowhead Pharmaceuticals (ARWR). Keep reading...

Investor Alert: “Buy the Rumor, Sell the News!”

Everyone knows that the Fed is going to cut rates at some point this year. That is the worst kept secret on the planet helping to explain how we keep making new highs for the for the S&P 500 (SPY). Unfortunately that creates an interesting predicament for stocks after rates are cut. Plus another hurdle in the 2024 Presidential election. Steve Reitmeister is here to share his insights on the market outlook along with a preview of his top 12 stocks to outperform. Read on for more...

Read More Stories

More Box, Inc. (BOX) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All BOX News