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CWAN

Clearwater Analytics Holdings NYSE:CWAN Stock Report

Last Price

US$16.59

Market Cap

US$4.0b

7D

1.5%

1Y

-25.7%

Updated

03 Oct, 2022

Data

Company Financials +
CWAN fundamental analysis
Snowflake Score
Valuation0/6
Future Growth5/6
Past Performance0/6
Financial Health5/6
Dividends0/6

CWAN Stock Overview

Clearwater Analytics Holdings, Inc. develops and provides a Software-as-a-Service solution for automated investment data aggregation, reconciliation, accounting, and reporting services to insurers, investment managers, corporations, institutional investors, and government entities.

Clearwater Analytics Holdings, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Clearwater Analytics Holdings
Historical stock prices
Current Share PriceUS$16.59
52 Week HighUS$26.60
52 Week LowUS$11.23
Beta0
1 Month Change11.79%
3 Month Change29.71%
1 Year Change-25.74%
3 Year Changen/a
5 Year Changen/a
Change since IPO-34.61%

Recent News & Updates

Sep 30

Clearwater Analytics to acquire JUMP Technology

Clearwater Analytics (NYSE:CWAN) to acquire Paris, France-based JUMP Technology. The move to fuel Clearwater's European expansion and enable path to complete cloud-based front-to-back investment lifecyle solution. The addition will allow Clearwater to offer an innovative, end-to-end platform for the hedge fund and investment management industry. Per the terms, CWAN to the purchase of JUMP Technology for Є75M, with employees and owners to receive up to 3.8M restricted stock units in Clearwater to be earned over four years from their grant date. The deal will add 100 employees serving 70 customers across Europe. The deal is currently expected to have a de minimis impact on Clearwater Analytics' revenues in Q4 2022. The transaction is expected to close in the fourth quarter of 2022.

Sep 09

Still Avoiding Clearwater Analytics

Summary Although sales growth has been impressive, profit has declined dramatically and this is troublesome in my view. If growing sales don't lead to growing profits, what does? In spite of this, the shares aren't objectively cheap in my view. Thus, I can't recommend buying at the current levels. The puts I wrote previously are in a paper loss in spite of the fact that they're 23% out of the money and will expire in a week. Puts are powerful instruments that enhance returns and reduce risk, but they can be eccentric and very unintuitive. It's been about five and a half months since I took my profits on Clearwater Analytics Holdings Inc. (CWAN) and since then the shares have dropped about 25% against a loss of about 11.6% for the S&P 500. I have a few reasons to return to this narrative and write about this company. First, and most important by far, is that doing so gives me a chance to brag, and I never want to pass up such an opportunity. Second, I'm obviously comfortable taking a long position here, and a stock trading at $15.80 is, by definition, less risky than the same stock when it's trading at $21. I want to work out whether or not it makes sense to buy again by reviewing the most recent financial performance, and by looking at the stock as a thing distinct from the underlying business. Finally, the puts I sold way back in February are about to expire, and I'm champing at the bit to write about that trade, too. I'll be writing about it because it'll give me yet another opportunity to brag, but you may gain some insight about the risk reducing, yield enhancing potential of short puts as an unintended consequence. I can imagine that the opening paragraph of this article has induced some eye rolling from the readership. I admit that there are few things worse than a braggart, and I've bragged twice already, so it may get tiresome. This is one of the reasons why I write thesis statement paragraphs for the readers. It gives them a chance to get into the article, learn my perspective, and then get out before they are exposed to too much of my odiousness. You're welcome. Anyway, while I appreciate the fact that the shares are cheaper, they're not cheap enough to buy in my estimation. Revenue has increased nicely, but net income has dropped precipitously. I would remind readers that owners of businesses aren't compensated by revenue. We're compensated by whatever's left over after employees, suppliers, various governments, bond holders etc. are paid. Thus, rising sales are great, but net income pays the bills. That said, the capital structure is incredibly strong, and I'd be willing to buy at the right price. Finally, the puts I wrote previously have done well, but they remain technically unprofitable in spite of the fact that they're about 23% out of the money and have one week before they expire. I consider puts to be powerful investments for reducing risk and enhancing returns, but I think investors should be aware of these potential eccentricities. I'd be happy to buy Clearwater again at the right price. Unfortunately, we're far above that price at the moment. Financial Snapshot I'd characterise the most recent financial results here as "troublesome." Although revenue and gross profit were about 22.4% and 16.2% higher during the first six months of 2022 relative to the same period a year ago, income from operations and net income fell off the proverbial cliff. The reason for this relates to the fact that the growth in costs outstripped revenue growth by a wide margin. In particular, G&A and sales and marketing expenses were troublesome for having grown by 56% and 63% respectively. This prompts the obvious question "if growing sales doesn't grow profits, what does?" I frequently need to remind investors that we owners are not compensated by revenue, but by whatever's left over after every employee, supplier, and government is paid. It's not all bad news over at Clearwater, though. Specifically, the capital structure remains very strong. Specifically, there's about $2.75 of cash and equivalents for every $1 of liabilities at the firm. This suggests to me that the company has the capacity to sustain continuing losses for quite a long while. For this reason, I'd be willing to take another speculative position in this company at the right price. Clearwater Analytics Financials (Clearwater Analytics investor relations) The Stock If you read my stuff regularly you know what time it is. It's the time where I turn into a bit of a financial "hall monitor", where I remind everyone that a company is distinct from its stock. The company buys inputs and sells them hopefully eventually at a profit. In the final analysis, that's all any company is. The stock, on the other hand, is a piece of paper that gets traded around in a public market and is influenced by a great many factors, many of which are only peripherally related to the underlying business. For instance, the stock price is certainly impacted by the company's recent financial performance. It's also impacted by the crowd's ever-changing views about the company's future financial performance. It's also potentially impacted by the changing moods of an influential analyst. Finally, the stock is influenced by the crowd's ever-changing perspectives on the relative merits of "stocks" as an asset class. To use this stock as an example, the market lost 11.5% of its value during the time the stock lost 25% of its value. It's impossible to prove this definitively, but I think it's reasonable to suggest that part of this 25% loss is a function of softness in the overall market. For all of these reasons, the stock is a much more volatile thing than the underlying business. While this is tiresome, it is potentially profitable. If we can spot the discrepancies between the crowd's take on a given business, and the assumptions embedded in the price, we can earn a profit. Finally, I've found that cheaper stocks offer a higher risk-adjusted return, so I like to buy shares when I consider them to be cheap and eschew them when they get expensive. If you're one of my regular readers/victims you know that I measure the cheapness (or not) of a stock in a few ways, ranging from the simple to the more complex. On the simple side, I look at the ratio of price to some measure of economic value like sales, earnings, free cash flow, and the like. Ideally, I want to see a stock trading at a discount to both its own history and the overall market. In my previous missive, I took profits here because the price to sales ratio hit 16.8 and the forward price to sales hit 12.5 times, both of which were about 25% more expensive than when I went long the stock. Fast forward to the present and this is the current state of the world: CWAN data by YCharts Source: YCharts Although the shares are cheaper now than when I abandoned the name, they're not objectively cheap in my estimation. If you're one of my regulars, you know that in addition to looking at simple ratios, I want to try to understand what the market is currently "assuming" about the future of a given company. If you read me regularly, you know that I rely on the work of Professor Stephen Penman and his book "Accounting for Value" for this. In this tome, Penman walks investors through how they can apply the magic of high school algebra to a standard finance formula in order to work out what the market is "thinking" about a given company's future growth. This involves isolating the "g" (growth) variable in a fairly standard finance formula. Some people have complained that Penman is a bit dense for them. Another great introduction to this idea of using the stock price itself as a rich source of information to work out expectations is "Expectations Investing" by Mauboussin and Rappaport. The duo has recently written an update, and it is excellent in my estimation.

Shareholder Returns

CWANUS SoftwareUS Market
7D1.5%2.1%1.0%
1Y-25.7%-29.4%-20.0%

Return vs Industry: CWAN exceeded the US Software industry which returned -33.3% over the past year.

Return vs Market: CWAN underperformed the US Market which returned -23.2% over the past year.

Price Volatility

Is CWAN's price volatile compared to industry and market?
CWAN volatility
CWAN Average Weekly Movement5.5%
Software Industry Average Movement8.7%
Market Average Movement6.8%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: CWAN is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.

Volatility Over Time: CWAN's weekly volatility (6%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
20211,371Sandeep Sahaihttps://clearwateranalytics.com

Clearwater Analytics Holdings, Inc. develops and provides a Software-as-a-Service solution for automated investment data aggregation, reconciliation, accounting, and reporting services to insurers, investment managers, corporations, institutional investors, and government entities. The company offers investment accounting and reporting, performance measurement, compliance monitoring, and risk analytics solutions. Its Clearwater Prism solution enables self-service access to data feeds from accounting, compliance, performance, and risk systems, including those offered by the company and other third-party software vendors, as well as provides flexible reporting to various users.

Clearwater Analytics Holdings, Inc. Fundamentals Summary

How do Clearwater Analytics Holdings's earnings and revenue compare to its market cap?
CWAN fundamental statistics
Market CapUS$3.96b
Earnings (TTM)-US$13.44m
Revenue (TTM)US$278.44m

11.2x

P/S Ratio

-231.7x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
CWAN income statement (TTM)
RevenueUS$278.44m
Cost of RevenueUS$80.06m
Gross ProfitUS$198.38m
Other ExpensesUS$211.83m
Earnings-US$13.44m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-0.072
Gross Margin71.25%
Net Profit Margin-4.83%
Debt/Equity Ratio17.6%

How did CWAN perform over the long term?

See historical performance and comparison