One stock that I have been following that I believe has flown under the radar and am now adding to my personal portfolio is $NCNO.

https://www.ncino.com/ 

A thread

1/ @ncino is a leading provider of cloud-based software for financial institutions. nCino essentially allows financial institutions like banks to more efficiently onboard clients, make loans and manage the loan life cycle, open accounts, and manage regulatory compliance.

2/ nCino is designed by former bankers and management has extensive backgrounds in IT spend at financial institutions. The company’s aim is to be the OS for financial institutions of all sizes around the world.

3/ What I like most about the company is its large TAM. Banks are actually some of the biggest spenders of IT services globally.

4/ SaaS revenues from banking are set to grow from $13B in 2018 to $28B in 2023 (a 17% CAGR!). That makes it one of the fastest growing markets within software!

5/ Management conservatively says that their TAM is only $10B but I think it can actually be more than 3x bigger.

6/ Looking at global SaaS companies selling into financial institutions, annual revenues are already in the $36B range! This is certainly the upper limit of nCino’s TAM but is in line with the $28B figure noted earlier.

7/ nCino has a strong competitive moat and is expanding its product offering to go into more verticals like document management, real estate analysis, and lending. I believe the ability to upsell customers more features and products will allow them to tap into that larger TAM.

8/ In fact, nCino has seen their ACVs (annual contract values) from their historical client cohorts continue to increase even as these ACVs have gotten bigger, showing that clients are adding on services. And they already have big name clients like @Barclays @TDBank_US

9/ $NCNO has everything you’d want in a leading SaaS stock: strong revenue growth (~50% yoy), a Rule of 40 of ~60%, and a net dollar retention of ~140%.

10/ On valuation, I don’t think it's all that expensive. $NCNO trades at 29x EV/NTM sales. Compared to similar SaaS companies with a Rule of 40 around 60%, $OKTA trades at 36x and $FROG trades at 33x. $FSLY and $MDB both have lower Rule of 40s but trade higher at 34x and 36x.

11/ Looking at the stock’s chart, $NCNO has pretty much traded in a range since IPOing in July 2020 and its EV/NTM sales is at its lowest point ever so I think this is a perfect entry opportunity.

12/ Analysts on Wall Street have price targets in the $90 range so the broader market has still not caught up as the stock is currently at $71.

13/ Now what kind of analysis would this be if I didn't present the risks too. nCino does currently have intense competition, a concentrated client base, and potential pitfalls from its international expansion especially into Asia and LatAm.

14/ That being said, I still think this is an asymmetrical investing opportunity. As a reminder, this is not financial advice, just my opinion and why I’m adding this stock to my portfolio now.

15/ Please like, retweet, and comment if you like my analysis and any other thoughts on the company are more than welcome!

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