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SciQuest, Inc is one of many lately who got caught between reporting earnings and market sentiment/derisking seeking full justification for companies with an EPS based on forward..forward...forward..earnings.Lately the sell cycle has been 2-5 days before any bounce occurs, but apparently in the case of SciQuest, the early props by analysts helped and rather than being down 25%, SciQuest recovered somewhat the last hour. Historically, (in the last few months), that doesn't mean success as additional analysts may chime in on Monday or larger holders may decide to sell into strength, but all things considered, it appears I have a good entry and my hold it long depending on what the next few innings bring.Cloud Based was a good buzzword to have, but may have put them in somewhat of a bubble. The field, however is still growing and consolidating. Meeting guidance is not enough in these cycles that take back from highly forward priced companies....investors are looking for beats that justify continued high end valuation. 23% YoY was not the right answer.Especially in the growth cycle where that increase is absorbed by expanded S&G, and the net is as close to break even as you can get.Share count, both weighted average and weighted average diluted is erratic, and is climbing double digits. This is somewhat typical in this industry, but shows up blatantly at the break even point.Playing in the plus/minus a penny range for the last year isn't harmful if the growth is reinvested wisely. The market, however, isn't going to forgive any misses and may penalize for "meeting". SciQuest needs to hit on the top line and at least hold on the bottom line.At 65-70% their somewhat inflated 52 Week high, I'll sniff around here for a little while, but I don't think SciQuest is likely to stay on my long list at current metrics, though I do give a little extra credit to companies with high institutional loyalty and low float, I subtract for low insider loyalty who get excessive stock compensation.
This company seems to be on path to be next Ariba
Increasingly Excessive P/E
Product (on-demand software to enhance, automate, & simplify procure to pay processes) well positioned, particularly with economy putting greater emphasis on cost cutting--supply expense one of the greatest areas for non-labor savings.Consistent revenue model from software as a service with long contracts; good backlog of new business / clients. Ascension Health could be huge win in healthcare space and key for significant growth in this vertical.Strong management team with clear direction; high customer satisfaction / retention.Comparatively low valuation based on earnings & growth potential.Would like to see greater earnings consistency and elimination of large, non-recurring expense items (management bonus for IPO, legal settlement, tax, etc) but expect this will come with maturity & experience with public reporting.
Life science companies will be challenged to maintain operating margins with increased price pressure. Sciquest is positioned to help these companies with improved cost controls software and service.
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