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Shares of Qlik Technologies (NASDAQ:QLIK) are in the spotlight after the company reported higher quarterly revenue, helped by an increase in license sales.

The company, which provides business intelligence software, posted fourth quarter revenue of $137.5 million, up 27% from a year ago, and well ahead of the Street consensus at $126.9 million. Non-GAAP profits of 25 cents a share topped the Street consensus at 23 cents. Revenue during the traditionally strong fourth quarter rose as licenses rose about 24 percent to $93 million. Revenue from the Americas jumped 42 percent, while that from Europe rose 20 percent.

Qlik shares surged Thursday in after-hours trading on the news, jumping almost 15% to over $26 after closing the day at $22.76

The company also said Chief Financial Officer Bill Sorenson would resign for personal reasons. He will continue in the position until a successor is named.

CEO Lars Bjork said the company's solid quarter was driven by 27% growth in enterprise sales.

We ended the year on a strong note with Q4 revenue and non-GAAP earnings per share exceeding the high end of our guidance. It's particularly pleasing to see our efforts in the enterprise space paying off.

Source: Earnings Call Transcript @ SeekingAlpha

For Q1, Qlik gave a light guidance: the company sees revenue of $87 million to $91 million, with a non-GAAP loss of 12-15 cents a share; the consensus has been $94 million and a loss of a penny a share. But for all of 2013, Qlik sees revenue of $465 million to $475 million, with non-GAAP profits of 39-42 cents a share; the consensus has been $452.7 million and 38 cents.

Qlik's peer Informatica (NASDAQ:INFA) also forecasted first-quarter revenue largely above analysts' estimates in January. Both companies have a significant market share in Europe. New orders from existing customers in Europe, a market that contributes about 60 percent of Qlik's revenue, have started to pick up after the economic slowdown. Car maker Volkswagen AG (OTCQX:VLKAY) is among customers to have signed new deals. Qlik also added customers, including Nasdaq OMX Group (NASDAQ:NDAQ) London City Airport and Toyota Motor Corp (NYSE:TM) Australia, during the quarter.

The Volkswagen Group is made up of 12 brands, including Volkswagen, Audi, SEAT, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN. Volkswagen AG currently has more than 4,000 QlikView users and more than 100 production QlikView applications in key businesses.

Qlik also won a big deal from a European retailer in the fourth quarter, Chief Executive Lars Bjork said on a conference call with analysts. He did not identify the retailer.

Europe continues to be a strong market for us and we experienced broad-based growth in the region as companies recognize that our software will help them better manage their operations and drive business outcomes in the current macroeconomic environment. For example, one of our bigger deals in the quarter was a retailer in one of the most challenging European economies.

The company, which also counts Autodesk (NASDAQ:ADSK), Kraft Foods (NASDAQ:KRFT) L'Oreal (OTCPK:LRLCY) and Qualcomm (NASDAQ:QCOM) among its customers, said there had been an increase in the overall number and average size of deals across its markets. Qlik completed 177 deals in the quarter, compared with 159 deals in the same year-earlier period. I believe the company's deals will continue to expand and grow and be one of the main drivers of the story.

Current Valuation

Qlik trades at a whopping 105 times trailing earnings. The company's expectations are for ~$0.40 in EPS for the current fiscal year, and the current stock price of ~$26 is 65 times that figure compared to its peer average of 28x. Qlik has a stable cash flow generation, and when I look at the forward enterprise value implied by the current stock price, it is 40x trailing EBITDA, much higher than the rest of the industry. However, the company has a strong cash reserve, which has steadily increased over the years. I expect cash per share to further improve in the coming quarters.

QLIK Cash and Equivalents Chart
(Click to enlarge)

Finally, I present a quick comparison of Qlik to its peers in order to provide clarity on how valuations should be interpreted in this segment; Gross Margin is the most meaningful metric given that Qlik is still growing.

QLIK Gross Profit Margin Quarterly Chart
(Click to enlarge)

Given Qlik's current and historically stronger gross margin profile compared to peers, I would expect the P/S and P/B ratio of Qlik to come in at a slight premium to peers.

QLIK Price / Sales Ratio TTM Chart
(Click to enlarge)

QLIK Price / Book Value Chart
(Click to enlarge)

Conclusion

I'm comfortable with a long-term revenue growth outlook of 18% to 20% on Qlik, along with a steady improvement in free cash flow generation. I think the company can leverage better cash flow from its operations; if the company can boost the margin into the high teens from the current 5%, which will lead to a steep-looking compound free cash flow growth rate of over 10%, I think the shares will be worth around $28.

Admittedly, that's not a compelling target relative to today's price, but Qlik enjoys pretty solid support and the Street is still bullish on the industry. While I'm indifferent about buying Qlik at these levels, I'd certainly consider a purchase if a broader market sell-off sends the shares down. I would wait for the shares to drop to the mid-to-high $20-$22 level, as the shares present an attractive risk/reward there. Sub-$22 is where I will start a long-term position.

Source: Better Days Ahead For Qlik Technologies