Twilio Inc. (TWLO) in San Francisco, and MiX Telematics Limited (MIXT) in Midrand, South Africa, are two prominent players in the software industry. TWLO provides a cloud communications platform that enables developers to build, scale, and operate customer engagement within software applications internationally. It also offers APIs that enable developers to embed voice, messaging, video, and email capabilities into their applications. In comparison, MIXT offers fleet and mobile asset management solutions through a software-as-a-service (SaaS) delivery model to customers worldwide. The company’s products and services provide enterprise fleets, small fleets, and consumers with safety, efficiency, and security solutions.
The rising adoption of cloud-based software solutions by enterprises to facilitate remote working and enable flexibility in their operations has been driving the Software-as-a-Service (SaaS) industry’s growth. Due to the resurgence of COVID-19 cases, widespread delays in office reopening plans should keep SaaS in demand for the foreseeable future. Indeed, the global SaaS market is expected to grow at a 12.5% CAGR to $436.9 billion by 2025. So, both TWLO and MIXT should benefit.
In terms of their past nine months’ price performance, MIXT is a clear winner with 3.2% gains versus TWLO’s negative returns. But which of these stocks is a better pick now? Let’s find out.
On August 19, 2021, TWLO unveiled its Developer Toolkit, a unique set of developer tools that offer unprecedented flexibility for companies seeking to customize their customer data stack and deliver truly differentiated customer experiences using the Twilio Segment CDP. The toolkit provides companies with the most powerful data collection and integration capabilities on the market. TWLO expects to see high demand for the product in the coming months.
In May, MIXT made available its new MyMiX Tracking app that allows companies to drive fleet safety and efficiency without the need for embedded hardware. MyMiX Tracking leverages mobile phone technology to record, measure and enable real-time tracking and self-correction of risky driving behavior, including speeding, harsh braking, harsh acceleration, and mobile phone use while driving. The app is likely to witness growing demand in the future.
Recent Financial Results
For its fiscal second quarter, ended June 30, 2021, TWLO’s non-GAAP revenue increased 66.9% year-over-year to $668.93 million. The company’s non-GAAP gross profit came in at $360.48 million, representing a 60.9% year-over-year improvement. Its non-GAAP income from operations came in at $4.20 million, down 55.8% from the prior-year period. TWLO’s non-GAAP net loss came in at $18.35 million for the quarter, compared to $14.03 million in net income in the prior-year period. Its non-GAAP loss per share was $0.11, versus $0.09 earnings per share in the year-ago period. The company had $1.80 billion in cash and cash equivalents as of June 30, 2021.
For its fiscal first quarter, ended June 30, 2021, MIXT’s total revenue increased 26.9% year-over-year to $34.90 million. The company’s gross profit was $22.86 million, representing a 20.8% rise from the year-ago period. Its non-GAAP income from operations was $4.34 million, indicating a 61.7% year-over-year improvement. While its non-GAAP net income increased 56.6% year-over-year to $2.87 million, its non-GAAP EPS increased 62.5% year-over-year to $0.13. The company had $46.13 million in cash and cash equivalents as of June 30, 2021.
Past and Expected Financial Performance
TWLO’s revenue and tangible book value have grown at CAGRs of 66% and 134.8%, respectively, over the past three years. The company’s total assets have increased at a 133.4% CAGR over the past three years.
Analysts expect TWLO’s EPS to remain negative in the current year and next year. Its revenue is expected to improve 51.9% year-over-year in the current year and 30.9% next year. The stock’s EPS is expected to grow at a 20.5% rate per annum over the next five years.
In comparison, MIXT’s revenue and tangible book value have grown at CAGRs of 2.8% and 9.3%, respectively, over the past three years The company’s total assets have grown at a 5% CAGR over the past three years.
MIXT’s EPS is expected to decline 18.5% year-over-year in the current year and rise 18.9% next year. Its revenue is expected to grow 12.2% year-over-year in the current year and 9.4% next year. Analysts expect the stock’s EPS to grow at a 1.8% rate per annum over the next five years.
In terms of forward EV/Sales, MIXT is currently trading at 1.69x compared to TWLO’s negative value.
In terms of forward EV/EBITDA, TWLO’s 21x compares with MIXT’s 7.31x.
TWLO’s trailing-12-month revenue is almost 16.8 times MIXT’s. However, MIXT is more profitable, with a 27.3% EBITDA margin versus TWLO’s negative value.
Also, MIXT’s ROE, ROA, and ROTC values of 13.6%, 7.7%, and 10%, respectively, compare favorably with TWLO’s negative values.
While TWLO has an overall D grade, which translates to Sell in our proprietary POWR Ratings system, MIXT has an overall B grade, equating to Buy. The POWR Ratings are calculated considering 118 distinct factors, each weighted to an optimal degree.
Both TWLO and MIXT have been graded a C for Momentum, consistent with their mixed price performance.
MIXT has an A grade for Value, in sync with its lower-than-industry valuation ratios. MIXT’s 7.31x forward EV/EBITDA is 53.8% lower than the 15.83x industry average. However, TWLO’s D grade for Value reflects its overvaluation. TWLO has a 251.02x forward EV/EBITDA, which is 1486.2% higher than the 15.83x industry average.
Of the 15 stocks in the Software – SAAS industry, TWLO is ranked last, while MIXT is ranked #2.
Beyond what we’ve stated above, our POWR Ratings system has also rated TWLO and MIXT for Growth, Stability, Sentiment, and Quality.
Both TWLO and MIXT should benefit from the SaaS industry’s growth. However, its lower valuation and higher profitability make MIXT a better buy here.
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 access the top-rated stocks in the Software – SAAS industry.
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TWLO shares were trading at $348.27 per share on Thursday afternoon, down $0.73 (-0.21%). Year-to-date, TWLO has gained 2.89%, versus a 20.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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