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AppFolio: With Simplicity, Comes Outperformance

May 08, 2020 2:54 PM ETAppFolio, Inc. (APPF)
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Tech and Growth


  • AppFolio builds a SaaS offering for only one market, which is the real estate. It has simple pricing, business model, and go-to-market.
  • The simplicity of the business potentially drives the outperformance.
  • Since the IPO in 2015, revenue and shares price have increased by over 3x and 10x, respectively.


AppFolio (NASDAQ:APPF) is an interesting investment opportunity in the SaaS real estate space. Revenue growth and OCF/Operating Cash Flows have been solid, while the business is profitable. Furthermore, the net profit margin has been in steady expansion as share price more than doubled over the last two years. The share price continued to trend upwards in 2020. It had a ~32% run-up to its YTD-high in February, right before the broader COVID-19 selloff. The stock has fallen by ~20% since then, which creates an attractive entry point to pick it up at a bargain.


In a nutshell, AppFolio makes money by selling an all-in-one cloud property management/PM software. To a much lesser extent, it also has a presence in the legal industry as it sells a similar software to the small law firm customers. This business is less successful and only makes up less than 10% of AppFolio's revenue. On the other hand, AppFolio's business as a whole has been exceptionally strong. Since the IPO in 2015, revenue has more than tripled, while share price has increased tenfold.

(Source: AppFolio.com/pricing)

We believe that the key to AppFolio's outperformance is the overall simplicity of the business. Given its focus on cloud-based PM software, AppFolio only needs to focus on one niche market, which is the real estate. The per unit/month pricing scheme is also straightforward and scalable for the customers. Moreover, simplicity would reduce the chance of making major execution mistakes. Consequently, the company's execution has been very solid. While top-line growth already decelerated to +36% towards the end of 2017 from +57% in 2015, the company has maintained growth in and around the +30% level as of the end of 2019.

The property management industry also provides an attractive upside, given the inherent digital transformation opportunity existing in any

This article was written by

Tech and Growth profile picture
Former tech operator, entrepreneur, and venture capitalist with over a decade of experience starting, investing, and building companies in Asia and US. Long-only manager seeking multi-asset technology / growth opportunities driving disruptive innovation globally.

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

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