Confluent, Inc. (NASDAQ: CFLT)

Sector: Technology Industry: Software - Infrastructure CIK: 0001699838
Market Cap 10.54 Bn
P/B 9.02
P/E -35.70
P/S 9.03
ROIC (Qtr) -16.81
Div Yield % 0.00
Rev 1y % (Qtr) 20.52
Total Debt (Qtr) 1.11 Bn
Debt/Equity (Qtr) 0.95
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About

Confluent, Inc. (CFLT) operates in the data infrastructure industry, providing a complete data streaming platform that enables organizations to stream, connect, process, and govern their data in motion. The company's mission is to set data in motion, empowering organizations to harness the power of real-time data to drive business outcomes. Confluent's main business activities revolve around providing a comprehensive data streaming platform that simplifies and scales the way data is moved across an organization. The company's primary products include...

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Investment thesis

Bull case

  • Healthy cash reserves of 347.21M provide 42.46x coverage of short-term debt 8.18M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 2.81B provides 2.55x coverage of total debt 1.11B, indicating robust asset backing and low credit risk.
  • Tangible assets of 2.81B provide exceptional 5.64x coverage of deferred revenue 498.64M, showing strong service capability backing.
  • Short-term investments of 1.71B provide solid 2.62x coverage of other current liabilities 651.72M, indicating strong liquidity.
  • R&D investment of 481.71M represents healthy 0.97x of deferred revenue 498.64M, indicating strong future innovation pipeline.

Bear case

  • Operating cash flow of 64.27M barely covers its investment activities of (185M), with a coverage ratio of -0.35, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (185M) provide weak support for R&D spending of 481.71M, which is -0.38x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 64.27M provides insufficient coverage of deferred revenue obligations of 498.64M, which is 0.13x, raising concerns about future service delivery capabilities.
  • Short-term investments of 1.71B significantly exceed cash reserves of 347.21M, which is 4.92x, indicating potentially excessive yield-seeking behavior at the expense of liquidity.
  • The company's operating cash flow of 64.27M shows concerning coverage of stock compensation expenses of 397.32M, with a 0.16 ratio indicating potential earnings quality issues.

Peer comparison

Companies in the Software - Infrastructure
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MSFT Microsoft Corp 2,948.93 Bn 24.73 9.65 57.61 Bn
2 ORCL Oracle Corp 734.55 Bn 67.24 19.76 124.39 Bn
3 PLTR Palantir Technologies Inc. 313.28 Bn 192.78 70.00 0.23 Bn
4 PANW Palo Alto Networks Inc 109.38 Bn 97.90 11.45 0.35 Bn
5 CRWD CrowdStrike Holdings, Inc. 102.48 Bn -326.20 22.45 0.82 Bn
6 SNPS Synopsys Inc 69.14 Bn 51.90 9.80 14.29 Bn
7 NET Cloudflare, Inc. 66.52 Bn -645.60 33.04 3.50 Bn
8 FTNT Fortinet, Inc. 62.73 Bn 33.48 9.57 1.00 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.80 2.10
EV to Cash from Ops. EV/CFO 176.57 3.92
EV to Debt EV to Debt 10.27 -2.43
EV to EBIT EV/EBIT -37.74 11.57
EV to EBITDA EV/EBITDA -32.78 18.19
EV to Free Cash Flow [EV/FCF] EV/FCF 297.71 19.98
EV to Market Cap EV to Market Cap 1.08 1.27
EV to Revenue EV/Rev 9.73 29.29
Price to Book Value [P/B] P/B 9.02 4.97
Price to Earnings [P/E] P/E -35.70 -12.45
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 0.21
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.73
Dividend per Basic Share Div per Share (Qtr) 0.00 0.11
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 1.67
Interest Coverage Interest Coverage 0.00 -16.04
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -9.11 -403.22
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -10.04 223.80
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 -0.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 14.43 585.97
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 11.92 5.89
EBIT Growth (1y) % EBIT 1y % (Qtr) 10.15 27.96
EBT Growth (1y) % EBT 1y % (Qtr) 10.15 20.61
EPS Growth (1y) % EPS 1y % (Qtr) 19.63 144.77
FCF Growth (1y) % FCF 1y % (Qtr) 301.72 50.30
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 22.75 45.98
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.39 0.65
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 0.51 1.23
Current Ratio Curr Ratio (Qtr) 3.83 2.63
Debt to Equity Ratio Debt/Equity (Qtr) 0.95 0.73
Interest Cover Ratio Interest Cover Ratio 0.00 -16.04
Times Interest Earned Times Interest Earned 0.00 -16.04
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) -22.90 -549.97
EBIT Margin % EBIT Margin % (Qtr) -25.77 -240.33
EBT Margin % EBT Margin % (Qtr) -25.77 -608.68
Gross Margin % Gross Margin % (Qtr) 74.30 51.14
Net Profit Margin % Net Margin % (Qtr) -25.30 -611.28