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Bull Of The Day: Sumo Logic (SUMO)
Sumo Logic (SUMO - Free Report) is a Zacks Rank #2 (Buy) and it sports an F for Value and a C for Growth. This stock has recently been designated as a potential target of two Private Equity companies and that has caused the stock to spike. Let’s explore more about this company in this Bull of The Day article.
Sumo Logic Inc. provides software solutions. The company's Sumo Logic Continuous Intelligence Platform(TM) automates the collection, ingestion and analysis of application, infrastructure, security, and IoT data to derive actionable insights. Sumo Logic Inc. is based in CA, United States.
Private Equity Interest
Late in the day on Monday, January 23 an article was published that suggested that Thoma Bravo, Vista Equity Partners and Francisco Partners have all approached the software company.
Brent Thill, the covering analyst at Jefferies wrote that the company could be worth as much as $17 per share if it were taken private. The low end of his take out multiple values the stock at $10.20.
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
For Sumo Logic, I see four straight beats of the Zacks Consensus Estimate. That is not great to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).
The average positive earnings surprise over the course of the last year works out to be 3.6%.
Earnings Estimates Revisions
The Zacks Rank tells us which stocks are seeing earnings estimates move higher.
Over the last 60 days, earning estimates have moved up for SUMO.
This quarter has moved up from a loss of $0.17 to a loss of $0.09.
The full fiscal year 2023 has increased from a loss of $0.55 to a loss of $0.36 over the last 60 days.
Next fiscal year id up from a loss of 55 cents to a loss of 32 cents.
Positive movement in earnings help move this stock to a Zacks Rank #1 (Strong Buy).
The valuation for this name is low even with the solid growth. There is no PE because earnings are negative. We do have a price to book multiple of 3.5x which is very low considering the fact that this is an asset slim business. Operating margins have improved by 450 basis points over the last few quarters which great to see. The price to sales multiple of 4.6x is low given the 27% topline growth that we saw in the most recent quarter.