A couple of weeks ago, I received an email from Tableau announcing that Salesforce completed its purchase of the company. I went on Yahoo! Finance and, sure enough, Tableau’s stock was no more. This made me sad because I enjoyed watching Tableau's stock volatile swings in the market.
What would I look at now that it was gone?
So I researched a few other business intelligence stocks to find a good replacement. I looked at the big players, such as Oracle and SAP, and a handful of smaller companies, such as Alteryx, Cloudera, Domo, Splunk, Talend.
While looking, I noticed one stock dramatically outperformed the rest. That stock was Alteryx (Ticker: AYX).
Alteryx offers a variety of self-service data prep and analytics solutions. Its stock grew over 780% since it went public in 2017, beating out every other stock along the way. That means an investment of $10,000 would be worth $78,000 today. The bulk of that growth was in 2018.
Looking at the chart above, I got to wondering what made Alteryx different? It didn't have the highest revenue. Nor did is spend the most on research and development. It had the highest amount of debt, excluding Oracle and SAP.
One thing that did set it apart though was its net income. The company actually made a profit in 2018. None of the other smaller companies on my list could say that and I imagine that's why the market has rewarded it the past year.
I covered this on past posts about Domo and Tableau, but most tech growth stocks don't make a profit. The same is true of BI growth stocks. Their strategy is to grow sales and reinvest it back into the company in the form of research and development or operations. Some companies, like Amazon, have done this throughout their existence and only seek to break-even.
The problem is most of the companies I researched don't actually break-even. They just lose money, which you can see in the graph above. That means they have to repeatedly borrow or raise money from investors.
Typically, they do this until they can make a large lump sum by selling themselves, which is what Tableau did with Salesforce.
It reminds me of that scene on Silicon Valley where a venture capitalist tells the CEO of a startup that "It's not about how much you earn, but how much you're worth. And who is worth the most money? Companies that lose money!"
Other Interesting Facts
Alteryx and the rest of the smaller companies I looked at are nothing compared to Oracle and SAP, in terms of size. Unlike most BI-focused companies that are publicly traded, these two have been around for awhile and are not considered growth stocks. Actually, both their revenues are far higher than all the other companies on my list combined.
They're less risky investments too because it's unlikely their customer base will leave them, at least on a mass scale. Most data solutions are like a marriage. If you buy an Oracle Server, it's harder to simply move your infrastructure to a MS SQL Server. Same is true for reporting tools, as well.