PeoplSoft article on Motley Fool indicates this gorilla is recovering.
PeopleSoft's Enterprising Double
By Rick Aristotle Munarriz (TMF Edible)
September 21, 2000
PeopleSoft Inc.
How Did It Double?
From 3Com (Nasdaq: COMS) to Domino's Pizza, from Hewlett-Packard (NYSE: HWP) to Sears (NYSE: S), PeopleSoft is helping keep major corporations humming along behind the scenes -- behind the curtain.
A leader in the enterprise software field, where everything from Customer Relationship Management (CRM) to sales and purchasing are regulated, PeopleSoft built an impressive client base and has been rewarded handsomely by Wall Street.
Revenues were on a tear. The top line soared 100% in 1996, and grew 81% in 1997. In 1998 it climbed by 58%. In that span of only three years, revenue went from $257 million to just shy of $1.5 billion. The bottom line followed suit.
The stock price peaked in April 1998. Then the sector -- and PeopleSoft -- cooled off. Last year sales dipped by 3.1%.
The stock bowed out of growth screens, yet even as it tumbled it was still too richly valued to generate interest from value investors. The shares bottomed out four months ago at $12 -- a fifth of what the stock was fetching just two years ago. But PeopleSoft charged back. It was beating turnaround projections, growing revenues again -- and thanks to the anticipation of the company's "Pure Internet Solution" software that was rolled out earlier this month, the catalyst for investor enthusiasm was taking shape. Hard times at PeopleSoft didn't last. The shares rose to the occasion.
Business Description
Founded in 1987, PeopleSoft specializes in eBusiness enterprise software. The company recently released PeopleSoft 8, billed as the industry's first suite of enterprise applications that runs purely on the Internet.
PeopleSoft provides a wide range of applications as well as providing consulting, training, and support services.
Financial Facts
Income Statement
12-month sales: $1471.0 million
12-month income: $45.6 million*
12-month EPS: $0.17*
Profit Margin: 3.1%
Market Cap: $8076.3 million
(*Excludes charges)
Balance Sheet
Cash: $758.2 million
Current Assets: $1281.8 million
Current Liabilities: $766.3 million
Long-term Debt: $69.0 million
Ratios
Price-to-earnings: 169.9
Price-to-sales: 5.5
How Could You Have Found This Double?
Late last year, PeopleSoft announced that it would acquire Vantive, a developer of front-office automation software. PeopleSoft had specialized in the back-office ware. The union, pairing the front- and back-office operations, was applauded as a way to round out the company's offerings.
"The merger will enable the combined company to offer a comprehensive eBusiness solution providing robust applications to attract, service, retain, and analyze customers," read the press release at the time of the purchase announcement.
While no one is expecting the company to overtake Oracle (Nasdaq: ORCL), the move made PeopleSoft a more complete one-stop shop. And even before the deal closed, PeopleSoft was turning things around. Over the past year the company has topped watered-down analyst estimates every single quarter. After last year's dip, sales bounced back -- up 12% so far this year.
Fundamentals were climbing while the stock was sinking, a move that was further fueled by April's tech stock correction. In May the stock could have been purchased in the pre-teens based on market sentiment -- not the proper improving corporate metrics.
Where to From Here?
PeopleSoft had a strong June quarter. While revenues grew by just 16%, margins improved and the company's fastest-growing segment -- software licensing revenues -- topped $100 million for the first time since the glory days of 1998. The niche now represents 26% of PeopleSoft's revenues, and its largest segment is the front-office CRM applications (a move that further validates its marriage with Vantive).
Exceeding analyst expectations is the best way to get Wall Street to raise its projections, and that has been the case in recent months. Estimates now call for the company to earn $0.26 a share this year and $0.55 next year.
PeopleSoft 8 appears to be a winner. ARM Research dubbed it "110% Internet," and while that might be a dirty word to jaded investors, keep in mind that this is eBusiness, not eCommerce. PeopleSoft's 4500 corporate accounts are typically brick-and-mortar titans seeking greater efficiency in all facets of operations with the assistance of PeopleSoft's software -- be it online or offline.
From the cost-saving promises of electronic B2B to the everyday functions of inventory management and customer retention, PeopleSoft has built an empire with trailing annual sales that now almost top $1.5 billion. 1999 is in the past -- in more ways than one |
