Cloud-based enterprise solutions provider QAD Inc. (QADA) has been reporting surging business growth over the past couple of quarters. This has allowed the stock to rally 72.5% over the past nine months. With a market cap of $1.36 billion, this small-cap company has been strengthening its foothold in the booming cloud computing market.
QADA has undertaken several steps lately to increase its market reach in the highly competitive cloud enterprises market. On January 6, 2021, it acquired German based strategic sourcing and supply management company Allocation Network GmbH. The acquisition is expected to streamline its ability to improve profitability of its partner companies through an expanded product and services base.
QADA recently expanded its operations to India, which is home to the second largest internet user base globally. QADA signed a channel partnership agreement with ESDS Software Solution. The partnership should allow QADA to sell its solutions and services packages directly to Indian manufacturers to aid in the digital transformation process.
And the company has also expanded to France. In December, it partnered with the pharmaceutical distributor CERP Rhin Rhône Méditerranée. Under the deal, QAD’s digital supply chain planning solution, QADA DynaSys Retail Planning Solution, will be used by the French pharmaceutical distributor to consolidate its supply chain.
QADA’s Impressive Growth and Profitability
QADA’s EBIT margin has increased at a CAGR of 15.6% over the past three years, while it’s leveraged free cash flow rose at a CAGR if 6.3% over this period. The company’s total assets increased at a CAGR of 3.7% over the past three years, while its EBITDA grew 312.8% year-over-year.
The company has generated $303.44 million in revenues over the past 12 months. Its trailing 12-month gross profit is $176.31 million, which equates to a gross profit margin of 58.01%. In fact, QADA’s trailing-12-month gross profit margin is 21.2% higher than the industry average of 48%. QADA’s trailing 12-month asset turnover ratio of 1.08 is 66.2% higher than the industry average of 0.65.
Promising Earnings and Revenue Estimates
Analysts expect QADA’s EPS to rise 90.9% in the current quarter (ended January 2021), 93.2% in fiscal 2021, and at a rate of 10% per annum over the next five years. The company has an impressive earnings surprise history as well; it beat the Street’s EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $77.90 million for the current quarter ending April 2021 represents a 5.5% rise year-over-year.
Favorable POWR Ratings
QADA has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
QADA also has an A grade for Growth and Quality and B for Stability. This is justified given the company’s surging profitability, robust growth story and future earnings potential.
There are 25 other stocks in the Software – Application industry with an overall rating of A or B. Click here to see them.
QADA’s recent partnerships with organizations around the world has allowed the stock to gain 43% over the last three months. However, we think the stock has plenty of upside, given its revenue and earnings growth potential due to its expanding operations.
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QADA shares were trading at $66.71 per share on Wednesday afternoon, down $1.69 (-2.47%). Year-to-date, QADA has gained 5.59%, versus a 4.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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