Clearwater Analytics Holdings, Inc. (CWAN): A Bull Case Theory 

We came across a bullish thesis on Clearwater Analytics Holdings, Inc. on Valueinvestorsclub.com by xxxOTK87. In this article, we will summarize the bulls’ thesis on CWAN. Clearwater Analytics Holdings, Inc.’s share was trading at $21.29 as of December 1st. CWAN’s trailing and forward P/E were 14.14 and 31.06 respectively according to Yahoo Finance.

Clearwater Analytics (CWAN) offers a leading cloud-based investment accounting and analytics platform, generating $475 million ARR and $146 million adjusted EBITDA, with no close alternatives in the market. The platform serves insurance companies, asset managers, hedge funds, and large corporations, providing a front-to-back-office solution that consolidates data, enables portfolio management, risk assessment, compliance, and regulatory reporting, and integrates with other enterprise systems.

CWAN’s platform is highly sticky, evidenced by a 98% gross retention rate and 80% win rates for new business, driven by its unmatched ability to reconcile complex securities and replace legacy solutions. Despite recent stock underperformance due to organic growth deceleration and tough FY’24 comps, the core business remains structurally sound, growing ARR at 21% over five years, with a multi-year low-20s growth trajectory expected to drive ~30% EBITDA CAGR.

Recent acquisitions of Enfusion and Beacon expand Clearwater’s addressable market to include asset management and hedge funds, complementing its insurance-focused core platform. Enfusion strengthens front-office capabilities, while Beacon enhances risk management and performance attribution, creating opportunities for cross-selling across Clearwater’s 1,400 clients and 900 acquired clients.

Integration of these platforms into a single security master is expected to further streamline operations, increase efficiency, and improve win rates. With only ~15% total market penetration and strong incremental margins, the combined company is positioned for continued revenue growth in the low 20s and EBITDA growth near 30%, offering IRR in the twenties over the mid-to-long term.

Even under conservative assumptions, CWAN’s mission-critical software, recurring revenue model, and expanding TAM provide a compelling risk/reward profile. Execution of acquisitions and the single-platform vision remain key catalysts, with continued high growth likely to dispel concerns around recent organic deceleration.

Previously we covered a bullish thesis on Donnelley Financial Solutions, Inc. (DFIN) by Dominick D’Angelo in January 2025, which highlighted its shift to recurring software revenues, high margins, and leadership in SEC filing solutions. The stock has depreciated approximately by 19.27% since our coverage due to transactional revenue cyclicality. The thesis still stands as software growth supports durable profitability. xxxOTK87 shares a similar but emphasizes Clearwater Analytics’ front-to-back-office platform, cross-selling, and low-penetration TAM driving high growth.

Clearwater Analytics Holdings, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held CWAN at the end of the second quarter which was 41 in the previous quarter. While we acknowledge the risk and potential of CWAN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CWAN and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.