NetSuite (N, Financial) has provided a strong guidance for the fourth quarter of 2014 that beat consensus estimates on revenue. It expects its revenue to be in the range of $154 million to $156 million, better than consensus estimates of $152.3 million in revenue for the quarter. Also, it forecasts its earnings for the quarter to range between $0.08 and $0.10 per share. Its earnings matched the consensus estimates of $0.10 per share for the quarter. Let us have a glance over its growth drivers that could fuel up its performance ahead.
The transition is driving growth
The software vendor’s recent transition to the Cloud-based software NetSuite has been incredible. This should help the customers escape from the hefty upfront fees to install, hard-to-maintain, hard-to-use and hard-to-upgrade software to the cloud or NetSuite. The company is seeing strong adoption of its Cloud or NetSuite that should enhance its performance in the coming quarters. NetSuite acquired more than 380 new customers who opted for its NetSuite in the recently reported third quarter.
In addition, the company has recently rolled out a new HTML5-based user interface with the launch of The NetSuite 14.2. This should help the users to quickly find the information regardless of any device. Moreover, this NetSuite 14.2 has been loaded with added functionalities that support the unique requirement for both business-to-customer or B2C and business-to-business or B2B ecommerce from single platform.
The NetSuite 14.2 offers every tool and function that these companies require to effectively run their customer portal and strengthen modern commerce operation from a single, integrated system delivered via the Cloud. The NetSuite 14.2 is additionally expected to support companies that are looking to streamline order management of back office processes, including sales commission calculation to payment.
Moreover, its SuiteCommerce offerings are gaining a lot of traction in the market. Further, the company remains focused on using SuiteCommerce capabilities outside the retail sector such as wholesale distribution and manufacturing. This offers additional opportunity for the company that could enhance its growth in the long run.
OneWorld offering to accelerate its earnings
The software vendor shares promising growth prospects. Its OneWorld offerings continue to get a lot of business for the company with inclusion of OneWorld multi-company, multi-currency, multi-language capabilities. NetSuite is effectively addressing multiple requirements of specific industries with ease, which is driving growth for the company. Also, the company is getting benefit of recent increase in Average Selling Price or ASP that should accelerate its bottom line performance going forward.
Meanwhile the company is also focused to expand its business operation outside North America. The company looks strong with its cloud insights and best practices with customers, prospects, partners and developers along with industry leaders. This should help the company to fetch more and more customers to its cloud offering or NetSuite.
Conclusion
NetSuite is looking like a great pick. The company is executing various growth initiatives and new products that should advance its growth going forward. The analysts have estimated CAGR of 23.75%, greater than industry average CAGR of 20.46% that indicate strong growth potential for the stock in the future. Also, it has attracting short-term returns. Its earnings are estimated to grow at CAGR of 26.90% this year and 42.40% respectively by next year. Its balance sheet carries total cash of $431.25 million, sufficient to cover its entire debt of $272.11 million. It has operating cash flow of $71.31 million and free cash flow of $156.42 million.
