SAP: Looking For Growth In SuccessFactors

| About: SAP AG (SAP)

SAP AG (NYSE:SAP) bought SuccessFactors (NYSE:SFSF) for $3.4 billion, at a 52% premium confirming SAP's push into cloud computing. SuccessFactors provides "cloud-based human capital management services."

While giving SuccessFactors a rich valuation of 11.6 times revenue, I'm impressed by SuccessFactors's revenue growth. While the company is not yet profitable, its impressive 5-year-average revenue growth of 74% leads me to believe SAP may have bought themselves a star. In comparison,'s 5-year average revenue growth is 40% and its price/revenue is 8.6.

SAP could use a little growth. It's revenues have been growing at a rate less than 8% over the last 5 years.

By buying SuccessFactors, SAP has also disrupted the plans of a number of investors: over 22% of the float has been shorted.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.