The IT service management industry has experienced significant growth in recent years owing to the growing shift towards cloud-based technologies, simplification and synchronization of IT resources, automated management of IT processes and policies, and various benefits of agile implementation and easy deployment.

Fueled by the flexibility, scalability, and cost-efficient nature of cloud solutions over premise-based solutions, more and more organizations worldwide are switching to cloud-based services, resulting in the demand for a more robust IT asset for organizations.

That being said, the IT service management market is forecasted to reach $36.60 billion by 2032, growing at a CAGR of 12.8%. Amid this growth, N-able, Inc. (NABL), a leading provider of cloud-based software solutions, stands out as a key player in the aforementioned industry.

The company’s digital transformation and growth-enabling solutions for small and medium-sized enterprises, as well as its remote monitoring and management solution offerings, have placed NABL in a leading market position. Its shares have declined 2.7% over the past five days, closing the last trading session at $9.10.

Now, let us delve deeper into the factors that could shape NABL’s performance in the near future.

Recent Developments

On December 5, 2024, NABL announced the addition of additional vendors to its Technology Alliance Program (TAP), enhancing the N-able Ecoverse vision by contributing to the harmonization and transformation of modern IT management.

The new additions, namely, Cork, ImmyBot, vCIOToolBox, and CYRISMA, could aid the company in uniting industry-leading technology companies to enhance and integrate their solutions with NABL’s extensive portfolio, expanding its offerings.

On November 20, 2024, NABL announced the acquisition of  Adlumin, Inc., an award-winning provider of an enterprise-grade security operations platform. The acquisition allows the company to incorporate Adlumin’s innovative technology with NABL’s industry-leading platform that combines security, unified endpoint management, and data protection solutions, boosting its capabilities and potential user growth.

Sound Historical Growth

Over the past three years, NABL has demonstrated consistent growth across key financial metrics. Its revenue and EBITDA grew at a CAGR of 10.8% and 26.3%, respectively. Moreover, operational income (EBIT) expanded at a CAGR of 53.4%, whereas its total assets grew at a CAGR of 4.8%.

Strong Financials

For the fiscal 2024 third quarter that ended September 30, NABL’s subscription and other revenue increased 8.3% year-over-year to $116.44 million. Its non-GAAP operating income grew 22.9% from the prior year’s quarter to $37.54 million.

Moreover, the company’s non-GAAP net income and non-GAAP EPS rose 41.3% and 44.4% year-over-year to $24.25 million and $0.13, respectively. As of September 30, 2024, NABL’s total assets amounted to $1.22 billion, compared to $1.16 billion on December 31, 2023.

Mixed Analyst Estimates

Analysts predict NABL’s revenue for the fiscal fourth quarter that ended December 2024 to increase 4.9% year-over-year to $113.77 million. Its EPS for the same period is expected to come in at $0.08. In addition, the company exceeded the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.

Looking at the full fiscal year ending December 2024, NABL’s revenue and EPS are expected to increase 9.9% and 23.1% from the prior year to $463.44 million and $0.46, respectively.

High Profitability

NABL’s trailing-12-month gross profit margin of 84.03% is 66.8% higher than the industry average of 50.38%. Its trailing-12-month EBITDA margin stands at 23.72%, 131.6% higher than the industry average of 10.24%.

In addition, the company boasts a trailing-12-month net income margin of 8.08%, which is 116.8% higher than the sector average of 3.73%. Also, the stock’s trailing-12-month levered FCF margin of 15.22% outperforms the industry average of 11.25% by 35.4%.

Discounted Valuation

NABL is currently trading at a forward non-GAAP P/E of 19.98x, which is 19% lower than the industry average of 24.66x. Moreover, the stock’s forward EV/EBIT multiple stands at 13.50, 37.3% lower than the industry average of 21.52x.

Additionally, it has a forward Price/Sales multiple of 3.65, which is 13.3% lower than the industry average of 3.22x. This indicates that NABL is undervalued compared to the broader market, offering potential upside for investors.

POWR Ratings Reflects Optimism

NABL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong 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.

NABL has a B grade for Value, driven by its discounted valuation metrics relative to the industry average. The stock also holds a B grade for Stability, in line with its 60-month beta of 0.41.

Within the Technology – Services industry, NABL is ranked #5 out of 79 stocks. Beyond what is stated above, we have also given NABL grades for Quality, Sentiment, Momentum, and Growth. Get all NABL ratings here.

Bottom Line

NABL has established itself as a significant player in the IT service management industry owing to its wide array of offerings that cater to the growth of a robust IT infrastructure for small and medium-sized businesses. The company is well-positioned to capitalize on the growth prospects of the IT service management market as well.

Given NABL’s impressive analyst estimates, robust financial performance, attractive valuation, and relatively low volatility, now could be an opportune time to consider adding the stock to your investment portfolio.

How Does N-able, Inc. (NABL) Stack Up Against Its Peers?

Although NABL’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Technology – Services industry:

Teradata Corporation (TDC)

NetScout Systems, Inc. (NTCT)

Key Tronic Corporation (KTCC)

To explore more A or B-rated Technology – Services stocks, click here.

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NABL shares were unchanged in premarket trading Monday. Year-to-date, NABL has declined -2.57%, versus a -0.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Aritra_Gangopadhyay

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success. More...

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