Looking For Potential Big Winners? These are two of our top investment ideas
PLTR and MNDY
This post is a collaboration between Rijnberk InvestInsights and MMMT Wealth. Make sure to subscribe to both these excellent publications for much more investing related content, investment ideas, and company analyses.
In this post, we want to introduce you to two of our favorite stocks/businesses, in which we hold shares. Each of these has terrific long-term prospects and often flies under the radar or is completely misunderstood.
Today, we want to put each of these on your radar as, in our view, these are both extremely exciting investment opportunities.
Without further ado, let’s dive in!
The Rijnberk InvestInsights pick:
Monday.com Ltd. ($MNDY)
Company description
Monday.com MNDY -0.91%↓, also known simply as Monday, may not ring a bell initially, but that's changing fast. Established in 2012, this SaaS powerhouse boasts a $13 billion market cap.
Despite its rather small size, Monday.com is disrupting the scene with its Work OS, garnering over 225,000 customers across 200 countries and 200 industries. Monthly, 2 million users already use its platform.
At its core, Monday.com offers a versatile Work OS platform, empowering users to craft tailored work management solutions with ease. Originally a collaboration tool, it now spans CRM, HR, and software development, catering to diverse enterprise needs.
From customizable workflows to specialized industry solutions, Monday.com facilitates seamless teamwork and project management. Its offerings, grouped under Monday CRM, Monday Dev, and Monday Work Management, cover lead tracking, sprint planning, and project tracking, respectively.
Monday.com stands tall against off-the-shelf SMB solutions and cumbersome enterprise software, offering flexibility in pricing, development, and customization. It's a game-changer, enabling efficient collaboration, innovation, and goal attainment across businesses of all sizes and sectors.
Key historical data
3-year revenue growth CAGR: 35.3%
Net income margin: negative 0.25% in FY23, up from -42% in FY21 (positive net income of 6% in 2Q24)
FCF margin: 28%
A rule of 60 company in 2023.
Projected EPS growth over the next 4 years of over a 30% CAGR.
Investment case in 5 points
Strong Market Position: Monday.com is a leading player in the collaborative work management (CWM) industry with its Work OS platform. It holds the top position in various use cases according to Gartner evaluations and boasts high customer satisfaction scores, such as a 4.7/5 rating on G2.com.
Continuous Innovation: The company has a robust track record of innovation, consistently rolling out new features and products. Its platform architecture facilitates rapid development and deployment, enabling it to drive 69% of ARR growth through new features. This innovation strategy fuels customer adoption and revenue growth with relatively low effort or resources.
Rapid Customer Acquisition and Expansion: Monday.com has experienced remarkable customer growth, with a 26% CAGR over the last five years, particularly among larger enterprises. Its land-and-expand strategy has been successful, effectively penetrating the enterprise segment.
Financial Resilience and Performance: Despite economic and geopolitical pressures, Monday.com has delivered resilient financial results in recent quarters. It reported strong revenue growth of 41% YoY for FY23, driven by enterprise customer acquisition and expansion. Improving margins, with a 28% FCF margin for FY23, highlight its solid financial performance.
Growth Prospects: With a Total Addressable Market (TAM) projected to reach $150 billion by 2026 and Monday.com's ability to introduce new features and capture market share, analysts project continued revenue growth at a CAGR of 30%. The company's scalable platform, diversified product offerings, and solid financial health position it for sustained growth in the evolving digital landscape.Oliver’s view on Monday.com
Is now the right time to pick up some shares?
While it is clear Monday has a very bright future and is one of the most exciting software picks in the market with a very dominant WorkOS platform, and despite a resilient financial performance in recent quarters in the face of cyclical headwinds, shares hadn’t seen the greatest momentum up until last week. After reporting blowout Q2 earnings earlier this week, shares are now up almost 25% over the last 5 days.
As a result, shares have now gained almost 40% YTD and 55% over the last twelve months, roughly in line with many of its software and technology peers. This has made Monday shares quite bit more expensive than one week ago, making it a bit harder to make now a compelling buy moment.
Shares now trade at 13.5x sales multiple, which isn’t overly expensive when compared to many of its slower-growing and less exciting peers trading at an even more demanding premium. Also, on an earnings basis, shares might look expensive, but with a PEG of just 2x, a discount of 10% to the sector median, shares are looking acceptable at current prices, especially considering Monday continues to outperform expectations and the runway of growth ahead.
While still far from cheap, the opportunity here is massive for this best-in-class software business. Still, I am somewhat cautious right now and plan on adding once shares fall to around the $220-230 level.
Check out Daan’s in-depth analysis of the company below.
Oliver’s view on Monday.com:
I’m extremely glad we did this collaboration post because I had never researched Monday.com before today, and this forced me to learn about a company that was very pleasantly surprising. It also timed perfectly just post a record-breaking quarter for this leading SaaS company.
After understanding the basics of the company, I spent some time understanding the valuation to conclude on whether the stock was worth investing into at current prices. I’m not sure exactly the price Daan invested but for me to invest today would reckless, despite the quality of the company.
Compared to direct competitors such as Atlassian, MNDY trades at an extremely hefty valuation of 11x Fwd EV/Sales vs 7x Fwd EV/Sales for just a slightly higher expected revenue growth rate. MNDY also trades in line with stocks like SNOW and DDOG which I have said on X a few times are high quality, but just too expensive for me to consider a position at the moment.
Therefore, for me I would not invest in MNDY today, but that doesn’t change the fact that the company has some extremely high quality characteristics. For those that invested in the company earlier in the year or in 2023, then a big congratulations!
The Make Money, Make Time pick:
Palantir ($PLTR)
Company Description
Palantir is a relatively well known stock but a relatively misunderstood company.
Most investors believe PLTR is a data analytics company but it’s not at all. Palantir is a software business that allows organizations to integrate all data into one place to detect risks, find inefficiencies, and spot opportunities.
The company has been traditionally split into two different segments:
Gotham (Government)
Foundry (Corporations)
Governments are constantly exposed to risk, especially those such as terrorist attacks. By using PLTR software, governments are able to integrate billions of data points to detect or prevent risks before they materialize.
For corporations, the PLTR software essentially does the same thing but most use cases are focused on logistical inefficiencies, money laundering, or product opportunities for example.
However, the most exciting part of the PLTR software today is the Artificial Intelligence Platform, also known as AIP. Despite the rapid improvement in AI use cases over the past couple years, generalized language learning models (LLM’s) don’t offer much help to businesses as people think because everyone’s businesses are so different and complex. Palantir has therefore managed to create AIP which allows companies to create specialized LLM’s by training models on their data basically allowing companies to create an infinite amount of digital assistants to enhance operations.
Key Historical Data
3-year revenue growth CAGR: 24.7%
Net margin: 12.8%
FCF margin: 27.5%
Investment Case
Leaders in an incredible industry: We are quickly moving towards commoditizing anything that can be produced by a machine. The key to this is data (collection, analysis, and utilization). This is Palantir’s bread and butter and they’re widely considered the best in the industry.
AIP: Customers are flocking to AIP with 40% YoY growth in the US and 27% YoY growth internationally. It’s also only just getting started. Once network affects become prominent, this product will go from strength to strength.
Financially strong: PLTR holds $3.87 billion in cash with just $217 million in long term debt. With a debt to equity ratio of 0.1 and cash flow to debt of 3, there’s no denying they’re financially solid especially for an earlier stage, high growth company like Palantir.
Up selling: Existing customers are rapidly increasing their usage of Palantir as they realize just how vital the software is to business operations. Lowe’s just recently went from 0 AI utilization to using AI for over 1,000 customer service agents which resulted in a 75% reduction in overdue tasks in just 4 months.
International expansion: PLTR have recently signed huge contracts with the UK NHS and Allied Partners around the world. US commercial revenue is currently higher than international commercial revenue, highlighting the TAM available in the rest of the world.
Daan’s view on Palantir:
I have to admit, I was among those that misunderstood this company for a long, long time, which is one of the main reasons I never really looked in to the company… sadly.
However, as perfectly pointed out by Oliver, Palantir is much more than a data analytics company. This software leader has a massive runway of growth ahead of it thanks to its global importance, especially for governments, and significant advancements in AI. Through its AIP platform, Palantir now owns one of the most exciting and promising AI products, which bodes well for its growth potential.
I wouldn’t be surprised to see Palantir grow even faster than it has done over recent years in the years ahead. The room for growth here is massive and Palantir is perfectly positioned.
Overall, I agree with Oliver and also view Palantir as a great and promising long-term investment. The company is an industry leader, shows great financial health, and has terrific growth potential. Convinced yet?
Yet, the big question: is now the time to buy? I recommend checking out Oliver’s deep dive into the latest quarterly results to find out! You can find it here:
That’s it for the day
I hope you loved this article. As I develop on here, I’m sure there will be some changes to my structure and style, so please do leave some feedback for me.
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Looked this. Two solid companies!
Great deep-dive guys!