Currently, nCino (NASDAQ:NCNO) is a SaaS company that uses the cloud to offer its services. Its clients are financial institutions in the US, and it's also starting to expand internationally. Overall, the stock is unique as it offers investors exposure to the cloud sector with a financial twist. Plus, NCNO's revenue growth makes it an exciting potential investment for growth investors and momentum traders. However, from a valuation perspective, I think the stock's valuation is entirely unjustifiable. For context, NCNO isn't even FCF positive, and its P/S ratio of 40 is sky-high. For context, we're talking about a company with a market capitalization of $7.59 billion that currently has less than $200 million in sales with negative margins. Therefore, given the circumstances, I believe investors should pass up on NCNO at these levels.
Source: company website.
Overview
In my opinion, nCino is an exciting company because it's the quintessential growth stock. Its service is virtually a bank operating system that revolutionizes how such financial institutions conduct their day-to-day operations. For instance, nCino's software appears to be fantastic at reducing onboarding times for new banking customers. Also, loan origination processes seem to be much more efficient with nCino's software.
Source: NCNO's IPO prospectus.
Generally speaking, it appears that most of the company's customers are relatively excited about the opportunities and efficiencies that nCino's solutions create for them. Hence, it's undoubtedly a value-creating service. And more importantly, the company's total addressable market is estimated to be approximately $10 billion, according to nCino, which means there's an ample runway for future top-line growth.
Underlying business
As you might expect, this type of service seems ideal as a cloud solution. And indeed, NCNO is built as such. In a way, you could consider it a niche version of Salesforce's (CRM) platform. Salesforce Ventures (the investment
