What is Sprout Social and why is it enjoying rapid growth
I confess that until the IPO of Sprout Social (NASDAQ:SPT) in late 2019 I had never really focused on the category of Social Media Marketing Management as an investment opportunity. I had always thought that Google (GOOG) was basically the gorilla in the space, and I was unsure how successful competitors could be. Google and other social media giants are always going to offer tools to promote usage and ad placement. But the fact appears that there is a great business opportunity beyond that, and a few companies, such as Sprout are out there trying to gain their place at the table. I believe that there is enough value add that can be offered-indeed is being offered-by Sprout to make it a successful business. Unlike many companies that have weathered the Covid-19 induced economic contraction with falling revenues and substantial financial impact, Sprout has seen only a modest impact that was limited in duration. Overall, using social media as a marketing strategy seems to one of those activities that will see a long-term benefit from the trends toward remote interaction that have been fostered by the pandemic, and its risks. Sprout would appear to have a desirable combination of market leadership, management skills, and a sector tailwind coupled with a somewhat lower level of relative valuation to generate positive alpha into the future.
Sprout is a relatively small company with current revenue forecast to be around $130 million in the current fiscal year. As these things go currently, the company's EV/S ratios, based on just more than 50 million shares outstanding, of less than 8X EV/S is far below the multiples other newly minted IT businesses such as recently reviewed Bill.Com. (BILL) Actually, the EV/S for this
