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Majesco: Will Cloud Transition Lead To A Higher Valuation?

Aug. 06, 2018 1:36 PM ETMajesco (MJCO)EBIX, EGAN, GWRE4 Comments
Allen Go, CFA profile picture
Allen Go, CFA


  • Potential increase in valuation multiple due to transition to a cloud-based SaaS (Software as a Service) business model.
  • For growth and momentum investors, revenue growth of 20% during the recent quarter with the stock breaking out to all-time highs.
  • For value investors, trading at an enterprise value to revenue multiple of 2.6x, a significant discount compared to companies in its peer groups (i.e 5-15x).
  • Assuming Majesco continues to execute, the stock price should appreciate due to various drivers including revenue growth, gross margin improvement, and valuation multiple expansion.

Fundamental Analysis

Company Overview

Majesco (NASDAQ:MJCO) is a provider of core insurance technology software and IT services to insurance carriers worldwide. The company delivers software and IT services in core insurance areas including policy administration, product modeling, new business processing, billing, claims, producer lifecycle management, and distribution. Majesco focuses on one vertical, insurance, and has developed insurance software, support, and business consulting expertise over two decades of serving the insurance vertical. The company has more than 140 insurance carriers using its product line. In addition to the United States, the firm operates in Canada, Mexico, the United Kingdom, Malaysia, Singapore, Thailand, and India. Customers using its core insurance software solutions include property & casualty, life & annuities, and pensions and group/employee benefits providers.

Source: Majesco's 10-K and web site


Majesco reported revenue of $33.5 million for the quarter ended June 30, 2018, a 20% increase compared to the prior year. Gross profit margin was 47.9% for the quarter ended June 30, 2018, compared to 42.6% for the quarter ended June 30, 2017. The increase in margin was primarily due to higher cloud revenue in the quarter as will be discussed later in this article. As a result, the company reported a profit of $0.03 per share for the quarter ended June 30, 2018 compared to a loss of $0.05 per share for the quarter ended June 30, 2017.

There is potential for additional upside if Majesco can continue its trajectory of revenue growth along with an increase in gross profit margins. Year over year, its operating expenses were relatively flat so any increase in gross profit basically drops to the bottom line.

Business Model Transition

Majesco has been transitioning its business to a cloud-based model, which should lead to an increase in gross profit margins as well as a higher

This article was written by

Allen Go, CFA profile picture
Allen Go is the founder of AMGO Capital, an investment management firm focused on risk-adjusted absolute return strategies. Allen has over 20 years of financial markets experience having traded equities, options, futures, and commodities utilizing both fundamental and technical analysis. He formed AMGO Capital after having worked in the mergers and acquisitions and corporate finance fields and is a CFA charterholder. He graduated with University Honors from Carnegie Mellon University with a Bachelor of Science in Business Administration (Finance).

Analyst’s Disclosure: I am/we are long MJCO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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