SailPoint Technologies Stock: Big Results Driving a Potential Breakout

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SailPoint Technologies a Safeguard Against Network Attacks

It seems like it is becoming more of a norm to hear about attacks on enterprise networks and the theft of critical data. The demand for cybersecurity solutions will continue to have strong tailwinds, which should bide well for companies like SailPoint Technologies Holdings Inc (NYSE:SAIL), which debuted on the stock market in November 2017.

SailPoint Technologies develops enterprise identity management software to help safeguard critical data and access to enterprises.

The company’s clients include some of the biggest names in the banking, healthcare, insurance, and pharmaceutical sectors worldwide, along with federal agencies.

The cybersecurity market is massive at over $135.0 billion in 2017, and this is expected to ramp up to around $231.94 billion in 2022. (Source: “Cybersecurity Market worth 231.94 Billion USD by 2022,” MarketsandMarkets, July 2017.)

SailPoint Technologies traded at $12.00 at its initial public offering. The stock has been sizzling on the chart, recently trading at a record $25.82:

Chart courtesy of StockCharts.com

SAIL stock has delivered a strong alpha to investors, advancing a stellar 78% this year, easily outperforming the Nasdaq and S&P 500 by a wide margin.

My Bull Case for SAIL Stock

SailPoint Technologies has minimal financial history, but managed to drive revenues up 41% to $186.1 million in 2017.

The strong growth in 2017 included a 53% surge in fourth-quarter revenues to $67.8 million, representing a forward run rate of about $271.0 million.

For 2018, SAIL is estimated to report revenue growth of 18.50% to $220.52 million followed by growth of 24,50% to $274.34 million in 2019. (Source: “SailPoint Technologies Holdings, Inc. (SAIL),” Yahoo! Finance, last accessed May 31, 2018.)

Based on the fourth-quarter results, SailPoint Technologies could easily beat the consensus for 2018.

SailPoint Technologies has also been able to manage its cost side and ramp up earnings by 112% to $0.13 per diluted share in 2017, well above the corresponding revenue growth of 41%.

The fourth quarter was especially impressive, with adjusted earnings per share (EPS) of $0.17, 113% above the consensus EPS.

A telltale sign for SAIL stock is the higher EPS revisions for both 2018 and 2019. This is a bullish signal for SailPoint Technologies.

Analyst Take

While SailPoint Technologies stock has broken out at $17.50 to a record, the upward move in EPS revisions provides some confidence.

Institutional ownership is relatively low at around 29% of the outstanding shares, but I expect more institutions to take a closer look at SAIL stock after the move to mid-cap status.

If the tailwinds remain strong, SailPoint Technologies could be setting up for some strong longer-term price appreciation.