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NetSuite Inc (N), Concur Technologies, Inc. (CNQR): Are These True Cloud or Cloud-Washing Companies?

Concur Technologies, Inc. (NASDAQ:CNQR)

Investment Thesis: Concur is the leading provider of Travel & Expense management software; the large amount of past investment spending is now positively affecting Concur Technologies, Inc. (NASDAQ:CNQR)’s organic growth rate. Incremental growth opportunities in underpenetrated geographies and solid, consistent bookings give us an indication that the company and shares will meet / beat investor expectations through 2013.

Contrarian idea: The consensus is missing what the US GSA (General Services Administration) contract could contribute in F2014/F2015. GSA was a $1.4 billion contract awarded to Concur Technologies, Inc. (NASDAQ:CNQR) in June, last year, in which the company is expected to provide the next generation E-Gov Travel Services. An analysis that measures the potential revenue contribution from GSA over the next 2-3 years shows that backing out GSA’s contribution, the Street is modeling a significant deceleration in the company’s private enterprise business, which is not likely to occur given that the last 4-6 quarters of bookings and, as qualitatively discussed by management, continues to be above the 25% revenue growth they guided to in F2013. The near-term risk is Concur Technologies, Inc. (NASDAQ:CNQR) ramping up all the large deployments that were signed in F2012.

Key Catalysts: Concur will host its first-ever analyst day on Tuesday, April 16 at its user conference, Fusion.

Valuation: The target price of $83 (means an upside of 22% from current levels) is based on a blended average using 50% of discounted cash flow (DCF) valuation and 50% relative comparable multiples of its peers. This valuation is supported by a 7.5 times enterprise value to estimated sales multiple using the calendar 2013 sales estimate (EV/R). The EV/R is higher than industry average multiples due to the company’s better-than-industry-average revenue growth and margins.

Foolish Bottom-Line

NetSuite Inc (NYSE:N) and Concur Technologies, Inc. (NASDAQ:CNQR), both stocks have not received as many favorable comments from the Street as they deserved. Both of them are set to fly high given their innovative product offerings and attractive valuations.

The article Are these True Cloud Or Cloud-Washing Companies? originally appeared on Fool.com and is written by Zain Abbas.

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