As the holiday season begins and cooler air strolls into town, look out for some hidden “buys” that are not on everyone’s radar. One of these is Talend SA (TLND, Financial), the big data management company specializing in cloud storage and other integrated capabilities.
Let's take a look at this promising company and see if there is still an investment opportunity.
Company on the rise
Talend’s real sell is its sophisticated, new across-the-board data integration solution. Nicknamed it’s “Data Fabric,” this program offers full data integration regardless of the platform used.
Talend makes a strong case for itself on the numbers. From 2013 to 2016, the company almost doubled its sales and its gross profit margin did even better. With annual revenue growth coming in at over 40%, Talend is poised to continue to grow and capitalize on its strong profitability.
Last month, Talend announced Gartner Inc. (IT, Financial) had labeled it a leader in this year’s Magic Quadrant for Data Quality Tools report, continuing a strong upward trajectory for the company and its reputation. There is clearly a lot more room for the company to grow.
Setting Talend apart
Here’s my take on Talend’s most positive attributes:
- High stock returns. Since its initial public offering in mid-2016, Talend has rewarded its shareholders with an over 70% return, and its momentum does not appear to be slowing.
- A positive, upbeat company culture. CEO Michael Tuchen has emphasized company culture and has himself bought into the company’s success, owning around 2% of its total stock. One can see from workplace review aggregators, such as Glassdoor and Yelp, that Talend has a positive, inclusive company culture. In tech startups especially, I look for company culture as a sign of its overall prospects for success.
- Impressive, ever-growing customer list. Year to date, Talend has seen an impressive 60% increase in customers. Its customer list continues to grow and now includes over 1,500 clients, including German luxury automaker BMW (BUD:BMW, Financial) and Japanese telecom behemoth NTT Docomo (DCM, Financial). As more noteworthy clients join, Talend’s reputation credibility will only grow. The company plans to continue targeting high-end enterprise clients, and we encourage them to do so.
- New and improved offerings. As Talend’s client list grows and sales continue to outpace costs, they are well positioned to further expand their client offerings, moving more completely into data integration, but also other fields within the cloud and data spheres. For instance, following several rounds of private equity over the past several years, Talend continues its focus on acquisition as a way of expanding its market reach. Just this week, Talend acquired Restlet Inc., a provider of cloud-based API design and testing.
- Private equity believes in Talend… at least for now. The company has gone through several rounds of private equity funding, and its two largest investors continue to hold significant holdings, indicating their continued belief in the company and its mission. Silverlake Capital continues to hold approximately 16% ownership while Balderton Capital holds approximately 14% ownership, making up almost one-third of the company’s entire market cap.
Growing fish in a big pond
Of course, it is not all good news. Talend is still relatively strong compared to its competitors and risks running into disadvantages against larger, well-scaled technology companies like Microsoft (MSFT, Financial) and IBM (IBM, Financial). It risks being out-competed by one of these bigger, capital-rich adversaries.
Yet being in an environment with lots of big players can have its advantages. Its successes could make Talend an attractive acquisition target, which would almost certainly be at a handsome premium of a price.
Talend in your stocking
Currently sitting at a little over $40, Talend is undervalued and purchasing now would be a wise move in our estimation. Do not believe me? Do not just take our word for it. Barclays, as recently as yesterday, adjusted its price target for Talend up to $55.
In your holiday stocking shopping, consider Talend. It has not tripled in price and it is no slam dunk, but sitting at its current price, you have the opportunity to collect some handsome rewards, especially over a longer time horizon.
Disclosure: I/We own none of the stocks mentioned in this article.
