As the Cloud market has matured with time, various customers have started moving their in-house ERP applications to Cloud, and this has leveraged growth of the Cloud-enabled ERP market. Market research companies like Price Water Cooper anticipate the market size of SaaS (Software As Application Service) based ERP solutions would reach $78 billion by the end of 2016, while the conventional ERP market can slide by 30% to $15 billion.
Various software companies are now eyeing this market to leverage its top and bottom line. Netsuite (N, Financial) is one such company that provides Cloud-enabled ERP under SaaS licensing policy. The company has been performing quite strongly in this segment of business and its growth is propelled by its innovative product. Investors of Tech stock can consider including NetSuite in their portfolios, as it can provide good returns in fthe uture.
Strong quarter
The company started its fiscal year on a strong note; it recently declared its first-quarter results for fiscal 2015, and the growth momentum continued to record gain. The consolidated revenue increased 34% year over year, to record $164.81 million as compared to $157.87 million in same quarter last year. This is the eighth successive quarter for the company to record growth.
Cash flow from operations also increased 45% year over year, to record $28 million as compared to $19.1 million in the same tenure last year.
Journey ahead
To support new business models, the company is focused on providing integrated Cloud-based ERP solutions. Such Hybrid ERP systems deployed on cloud can scale to new customer needs and can increase the customer count for NetSuite that will influence growth of its top and bottom line.
A Cloud-based ERP system provides a sustained revenue for the company as it provides the complete ERP solution as SaaS application. The company has been increasing the customer count for its ERP solution which can propel the revenue growth in future with its renewal license contracts.
The company also targets the ecommerce market for both B2B (Business to Business) and B2C (Business to Customer). SuiteCommerce is an omnichannel product that supports B2B and B2C needs of the customer deploying ecommerce for their business. SuiteCommerce is already being embraced by big brand names. Recently, Domino’s Pizza (DPZ, Financial) selected SuiteCommerce for its online ordering system. The new online system, streamlines the equipment and supply ordering process for franchisees through self-service payment and shipment tracking.
Furthermore the company has also declared that it will be acquiring Bronto Software Inc. NetSuite will be spending $200 million to acquire Bronto. This acquisition will add extra weight to NetSuite's product portfolio for providing Cloud-based commerce solutions. This transaction is expected to close in the second quarter of 2015.
Consensus of analysts expect NetSuite to grow by 56.7% by next year; this is almost double compared with the industry and the sector growth that is anticipated to be around 23% and 25.6% respectively. Furthermore for the next five years the company is expected to attain a growth of 26.12% every year, this again is much higher than the industry and the sector growth which stands around 20.19% and 17.71%.
Conclusion
The company has been constantly delivering strong results. The Cloud-based ERP market also has a strong market in future and NetSuite is one of the leaders in this market segment. The acquisition of Bronto will further propel growth for the company in upcoming quarters. I feel, NetSuite can be one of the most preferred tech stocks for an investor looking for good long-term returns.
