ServiceSource Stock Could Be a Double in the Works

ServiceSource Stock

ServiceSource Could See a Doubling

In searching for beaten up technology stocks that have failed to follow the NASDAQ on its 30% run this year, I’ve found an aggressive micro-cap that offers traders with an appetite for risk: ServiceSource International Inc (NASDAQ:SREV).

SREV stock is down 45% year-to-date, trading as low as $2.61 on November 6 before rallying to above the $3.00 level. However, the stock is way off from its 52-week high of $6.05 in February 2017 and $23.60 in June 2011.

serv stock chart

Chart courtesy of


While ServiceSource stock is trading at the bottom of the barrel, so to speak, and will face many hurdles trying to get out, the stock is ideal for the aggressive trader willing to assume the risk of further losses, but also for its potential to turn a possible double.

ServiceSource operates as a business services company, helping clients in 170 countries improve the attainment and maximization of their recurring revenues, which is often critical for many companies. Clients are in hardware, software, cloud, medical devices, and the industrial side of the “Internet of Things.”

At first glance, you would think ServiceSource is involved in a high-potential, niche segment. I mean what company doesn’t need help to formulate a sales plan?

My Fundamental Bull Case for SREV Stock

A look at the revenue stream at ServiceSource shows a laggard. Revenues stood at $272.18 million in 2014, but have declined to $252.88 million in 2017.

For SREV stock, it’s all about the optics and delivering on revenues and generating profits. If the company can do that, I would expect ServiceSource stock to rally.

The current year is predicted to see ServiceSource produce a 5.2% decline in revenues. The encouraging sign is that revenues are projected to jump 6.5% in 2018. (Source: “ServiceSource International, Inc. (SREV),” Yahoo! Finance, last accessed December 22, 2017.)

Now I realize these as not the kind of metrics that makes you want to jump up and cheer, but it’s a start, and if ServiceSource can continue to ramp up revenues, the market would reward investors.

As far as the bottom line, ServiceSource is a money loser. But what is encouraging is the fact the company has managed to expand the key gross margins, turning in an adjusted profit in 2016.

Gross Margins

2014 28.7%
2015 32.1%
2016 34.7%

The gross margin expansion, if it continues to improve, will translate into a stronger bottom line for ServiceSource.

If everything plays out, ServiceSource could grow profits in 2017 and make as much as $0.14 per diluted share in 2018, giving us a reasonable 22x forward multiple.

Looking at earnings from another angle, the five-year compound annual growth rate for earnings is expected to ramp up to 25% from the 9.54% over the past five years.

Analyst Take:

As I said earlier, ServiceSource stock could record a doubling in its shares under the right circumstances and outcomes.

Insiders at ServiceSource seem to be bullish and backing their company’s direction via strong insider buying action that saw 474,772 shares bought across 12 transactions during the last six months as the price of SREV slid.

My suggestion is to follow the insiders and see where it takes you with ServiceSource stock. Perhaps a double is in the works.