Eloqua Limited - Appealing Value In This Fast Growing Data Analytics Firm

| About: Eloqua (ELOQ)

Shares of Eloqua Limited (ELOQ) saw a successful public debut on Thursday. Shares of the software developer providing customer relationship management solutions ended their first day up 12% at $12.89 per share.

The public offering

Eloqua Limited, the producer of software which translates internet search terms into readily available sales information, sold 8.0 million shares for $11.50 a piece. The firm sold 7.0 million shares in the offering, with selling shareholders selling another 1.0 million shares. Eloqua raised $80.5 million in gross proceeds in the offering process. Based on the offer price of $15 per share, the firm is valued at $368 million. Initially the firm and its bankers set and an offer price range of $9.50-$11.50 per share. In total the firm sold a quarter of its shares outstanding. At Thursday's closing price of $12.89 the firm is valued at $412 million. Major banks which brought the company public were J.P. Morgan, Needham & Company and Deutsche Bank.


Eloqua's software solutions are "designed to enable businesses to accelerate revenue growth and improve revenue predictability by automating, monitoring and measuring their complex marketing and sales initiatives".

The company currently serves over 1,100 customers including multinationals like Adobe Systems (NASDAQ:ADBE), American Express (NYSE:AXP), Dell (NASDAQ:DELL), Nestle (OTCPK:NSRGY) and Siemens (SI). Eloqua Limited reported annual revenues of $71.3 million for its annual year of 2011, up 40% on the year before. The company reported an annual net loss of $6.2 million in 2011, compared to a loss of $1.5 million in the year before.

For the first six months of 2012 the company generated $45.0 million in revenues, up 42% compared to the first half of 2011. The net loss for the six month period came in at $5.5 million.

On a pro-forma basis the company operates without any debt and holds a pro forma cash position of around $85 million. This values the operating assets of the firm around $327 million. Based on a rough annual revenue estimate of $100 million for 2012, the market values Eloqua at around 3.3 times annual revenues. Currently the firm is not profitable.

Investment Thesis

Eloqua's public offering is a great success with shares trading up 12% compared to its public offering price of $11.50, after the offer price has been set at the high end of the initial price range. Operating in the popular "data analysis" industry, the successful public offering did not come as a success. Shares of real time data collector Splunk (SPLK) returned 65% after going public in April of this year.

For an industry outsider it is difficult to evaluate the prospects of fast growing, but loss making firm like Eloqua. However valued at 3.3 times annual revenues, the valuation does not seem too stretched for a fast growing firm in the hot data analytical industry, especially given the 40% annual revenue growth.

With large technology companies including IBM (IBM) having announced their ambitions in the field, firms like Eloqua always offer the potential of a buy-out at significant premium. Opportunistic investors could step in for the long term.

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