OOMA: Undervalued Company With Strong Retention Rates

Aug. 24, 2017 11:11 PM ETOoma, Inc. (OOMA)2 Comments
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Tech, Software, Semiconductors, Long/Short Equity

Contributor Since 2015

I am software engineer by training. My true passion is analytics and stock analysis. My experiences in NVIDIA, BOX and IoT companies helps me better understand chip maker business, SaaS and IoT business.


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Summary

  • OOMA customer retention rates of 94%, revenue retention rate of 98%. It is insanely good for any business with recurring revenue. Salesforce retention rate is around 90%.
  • 0.85x EV/revenue is extremely low valuation in peer group based on various growth metrics.
  • Companies with similar growth metrics are valued around 2.5x - 5x EV/revenue. OOMA is a bargain @ $8 per share.

Let's just compare OOMA (OOMA) to some tech companies with recurring revenue:

MobileIron (MOBL): EV/TTM revenue - 1.6x. Quarterly YoY revenue growth between 5% and 12% in the last 4 quarters. 

ChannelAdvisor (ECOM): EV/TTM revenue - 1.75x. Quarterly YoY revenue growth between 7% and 15% in the last 4 quarters.

Onvia (ONVI): EV/TTM revenue - 1x. Quarterly YoY revenue growth between 1% and 5%.

Care.com (CRCM): EV/TTM revenue - 2x. Quarterly YoY revenue growth between 10% and 16%.

And the list goes on.

In addition, OOMA is twice as efficient in generating new revenue compared to any company above. 

So how is this possible, that OOMA is so cheap? What am I missing?

Disclosure: I am/we are long OOMA.

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Comments (2)

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