Workday's excellent business model and market leadership in human resource management with recurring, sustainable revenue makes it attractive.
Workday has transitioned from a fast growing, young tech trail blazer in Human Resource Management to a steadier GARP (Growth At A Reasonable Price). At $10Bn growth naturally slows down to below 20%. At $10Bn in sales Workday is no longer the nimble upstart and is increasingly being categorized as legacy tech to be sidelined by ChatGPT. To me that makes no sense and the all pervasive fear gripping the sturdy SaaS companies makes this stalwart an interesting purchase at this bargain price.
Workday is priced at a low multiple of 19x earnings growing at 17% and just 5x sales growing at 13%. That's a low PEG (Price Earning To Growth) ratio of just 1.2???, we don't need to categorize it as a slowing SaaS, this should be bought on earnings alone. And even if one were to measure it in sales growth 5x sales growing at 13% is a P/S growth of 0.38, that's low.
The AI negative that it cannot shake off: The markets believe that it would lose a) seats, as automation robs companies of headcount, which means fewer humans to manage, thus fewer licenses to sell, and b) lose some features that could be handled in house with the help of AI.
But this little evidence yet to suggest that any AI companies like Anthropic's Claude are encroaching into Workday's core territory, the slower sales growth is not abnormal for a 10$Bn software company and is similar to several peers in that range. Microsoft, Salesforce, Service Now are growing slower as well but are priced higher. I believe the markets are over reacting and giving us an opportunity to scoop up a solid company at a bargain price.
Nebius' masterly execution as an integrated neocloud player allows it to borrow at very cheap interest rates with very little shareholder dilution.
Nebius is executing brilliantly as an integrated neocloud player with tremendous reach, value addition and strong pricing power.
