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Tibco Software Inc. (TIBX): A Cheap High-Growth Software Company

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I always have a special appreciation for smaller companies who go up against the big players and win (or at least are competitive). Tibco Software Inc. (NASDAQ:TIBX) is one such company. This business software maker’s competition includes such powerhouses as Oracle Corporation (NASDAQ:ORCL) and Microsoft Corporation (NASDAQ:MSFT), who also produce successful business software products. Despite this level of competition, Tibco Software Inc. (NASDAQ:TIBX) has thrived, with revenues about four times what they were a decade ago. Will they continue this trend, or should investors choose one of the larger rivals instead?

About TIBCO Software

Tibco Software Inc. (NASDAQ:TIBX) produces software products in three main categories: business process management software, business optimization software, and service-oriented architecture (SOA), which are solutions designed to allow seamless interaction between services written for different systems.

Tibco Software Inc. (NASDAQ:TIBX) is truly a global company, with just about half of its revenues coming from the Americas, and most of the rest coming from Europe, the Middle East, and Africa. The company makes its money from two primary sources: licensing revenue and service/maintenance, both of which are growing; however, the company’s license revenue has been less predictable.

Cheap or Expensive?

Tibco Software Inc. (NASDAQ:TIBX) trades for around 18.5 times last year’s earnings, which are expected to drop slightly to $1.04 this year, mostly as a result of one-time employee stock-based compensation expenses. However, in 2014 and 2015, earnings are projected to grow to $1.25 and $1.49, respectively, on sales growth of about 9% each year and slightly wider profit margins. With the company’s track record of growth (and profitability), I think the stock looks pretty cheap at the current level, which, by the way, is closer to its 52-week low than its 52-week high.

The Big Boys

As mentioned earlier, the biggest threat to TIBCO is larger software companies, which can generally afford to operate at lower margins and can offer more competitive pricing due to their abilities to bundle services. Let’s take a quick look at the two companies mentioned already to see if our investment dollars would be put to better use with them.

Microsoft: The Biggest and Strongest

Between their Windows operating system and Office applications, which are used to some degree on most PC’s and laptops, Microsoft’s products are widely looked at as “essentials.” As the world’s largest software company, it is true that you shouldn’t expect quite as much growth as you would from an up-and-comer such as TIBCO, but Microsoft makes up for this lack of growth with stability and income.

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