Freshworks Inc. (NASDAQ: FRSH)

Sector: Technology Industry: Software - Application CIK: 0001544522
Market Cap 2.90 Bn
P/B 3.41
P/E -98.00
P/S 3.58
ROIC (Qtr) -478.14
Div Yield % 0.00
Rev 1y % (Qtr) 15.30
Total Debt (Qtr) 31.42 Mn
Debt/Equity (Qtr) 0.04

About

Freshworks Inc., a prominent company with the ticker symbol FRSH, operates in the customer and employee service solutions industry. The company's mission is to simplify and expedite the process for businesses to provide delightful experiences to their customers and employees. Freshworks offers modern and innovative AI-guided customer and employee service solutions, empowering businesses of all sizes to enhance user engagement and productivity. Freshworks' main business activities involve delivering a suite of products catering to various markets...

Read more

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 221.40M provides robust 7.05x coverage of total debt 31.42M, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 1.14B provides 36.44x coverage of total debt 31.42M, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 199.32M exceeds capital expenditure of 22.08M by 9.03x, indicating strong organic growth funding capability.
  • Cash reserves of 420.93M provide robust 0.93x coverage of current liabilities 450.62M, indicating strong short-term solvency.
  • Operating cash flow of 221.40M provides strong 21.99x coverage of operating expenses 10.07M, showing operational efficiency.

Bear case

  • Operating cash flow of 221.40M barely covers its investment activities of 258.08M, with a coverage ratio of 0.86, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 221.40M provides insufficient coverage of deferred revenue obligations of 348M, which is 0.64x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of 221.40M shows concerning coverage of stock compensation expenses of 199.89M, with a 1.11 ratio indicating potential earnings quality issues.
  • Operating earnings of (9.60M) show weak coverage of depreciation charges of 34.86M, with a -0.28 ratio indicating high capital intensity and potential reinvestment needs.
  • Operating cash flow of 221.40M is outpaced by equity issuance of (393.56M) (-0.56 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Software - Application
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SAP Sap Se 234.56 Bn 28.15 5.46 10.73 Bn
2 CRM Salesforce, Inc. 204.28 Bn 32.96 5.39 11.14 Bn
3 SHOP Shopify Inc. 169.36 Bn 95.09 15.83 1.12 Bn
4 UBER Uber Technologies, Inc 167.13 Bn 10.04 3.37 12.19 Bn
5 INTU Intuit Inc. 140.92 Bn 175.06 33.55 6.78 Bn
6 ADBE Adobe Inc. 124.98 Bn 17.53 5.26 6.65 Bn
7 NOW ServiceNow, Inc. 121.03 Bn 69.24 9.11 2.40 Bn
8 ADP Automatic Data Processing Inc 100.13 Bn 23.64 4.72 4.37 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.78 2.50
EV to Cash from Ops. EV/CFO 11.04 12.27
EV to Debt EV to Debt 77.79 50.31
EV to EBIT EV/EBIT -254.63 10.96
EV to EBITDA EV/EBITDA -158.05 16.84
EV to Free Cash Flow [EV/FCF] EV/FCF 12.26 14.08
EV to Market Cap EV to Market Cap 0.84 -118.20
EV to Revenue EV/Rev 3.01 4.45
Price to Book Value [P/B] P/B 3.41 4.27
Price to Earnings [P/E] P/E -98.00 -133.65
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -3.97
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 4.25
Dividend per Basic Share Div per Share (Qtr) 0.00 0.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.54
Interest Coverage Int. cover (Qtr) 0.00 -51.80
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -124.05 -210.77
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 7.63 9,906.83
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 1.62
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 70.83 -265.85
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 88.12 55.76
EBIT Growth (1y) % EBIT 1y % (Qtr) 90.42 -227.83
EBT Growth (1y) % EBT 1y % (Qtr) 90.42 -88.00
EPS Growth (1y) % EPS 1y % (Qtr) 68.57 121.91
FCF Growth (1y) % FCF 1y % (Qtr) 42.07 -40.82
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 19.50 92.11
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.59 0.58
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.93 3.77
Current Ratio Curr Ratio (Qtr) 2.27 8.19
Debt to Equity Ratio Debt/Equity (Qtr) 0.04 0.16
Interest Cover Ratio Int Coverage (Qtr) 0.00 -51.80
Times Interest Earned Times Interest Earned (Qtr) 0.00 -51.80
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 3.10 -105.77
EBIT Margin % EBIT Margin % (Qtr) -1.18 -131.65
EBT Margin % EBT Margin % (Qtr) -1.18 -122.72
Gross Margin % Gross Margin % (Qtr) 84.80 58.14
Net Profit Margin % Net Margin % (Qtr) -3.70 -127.70