SAP - Workday: A Nice Payday For Long-Term Investors

2024-07-09 17:47:42 ET

Summary

• Workday, Inc. has become the dominant HCM application for large enterprise customers.
• The company has significant growth opportunities, including further penetration of the HCM market, increased traction in Financials, and layering in Analytics.
• Workday should be able to sustain 20% EPS/FCF growth on 15%+ revenue growth over several years.
• The stock currently trades at a level first reached almost five years ago, and the EV/Revenue multiple of around 7x is near an all-time low.
• We recommend starting a position in Workday, Inc. and would become aggressive buyers around $200.

The Company

Workday, Inc. (WDAY) was founded in 2005 by a team that started PeopleSoft, which became the leader in traditional on-premise enterprise HR software. PeopleSoft was ultimately sold to Oracle ( ORCL ) in 2005, and shortly after, Workday was created with the idea to bring the first cloud-native Human Capital Management application focused on the large enterprise. The application’s modern architecture features flexibility, speed, ease of use, and lower total cost of ownership than other third-party or home-grown applications. In addition, Workday offers a financial suite (FINS+) to replace existing Finance and Accounting applications....

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