A Thorough Financial Analysis of Snowflake Inc.
Founded in 2012, Snowflake is a California-based public company that specializes in cloud computing. Over the years, Snowflake has worked with companies such as Electronic Arts Inc. and Capital One Financial Corp. in managing and analyzing their cloud data.
Snowflake has already attracted some big-name investors, with the likes of Warren Buffet and Salesforce, a provider of business software, making investments of $250 million each. In this post, we’ll take a look at Snowflake’s financial figures from the last few quarters and whether or not it makes sense for global investors to invest in the tech giant.
A closer look at the company’s financial
For a tech IPO, Snowflake’s numbers are mind-boggling. In the fiscal year that ended on January 31, Snowflake experienced a growth of 173% and boasted of a 56.2% gross profit margin.
The fiscal year 2021’s first six months saw the company’s revenues grow by another 133%, and an upsurge was witnessed in the gross profit margin, which improved to 61.5%. A further 121% revenue growth was reported by the company in the last quarter with a 158% net retention rate – a record-breaking feat.
While the figures are staggering, investors must keep in mind that Snowflake is a relatively-young cloud-computing company compared to many of its cloud Software as a Service (SaaS) competitors. The triple-digit growth figures indicate that the company is in good financial health. However, the company’s age has already started to have telling effects on its financials, as the dip from 173% to 133% to 121% growth rate suggests. The net retention rates are predicted to go down in the long run as well.
Losses to consider
Despite the company’s sustained triple-digit growth rates, it has incurred losses as well, which investors must consider. In the fiscal year 2020, the net losses rose to $348.5 million from $178 in the fiscal year 2019, almost double. The period-over-period comparison between fiscal years 2020 and 2021(first six months) shows a flat loss rate; $171.3 million and $177.2 million.
However, due to the company’s age, it’s difficult to predict whether the flat loss rates can be sustained. Negative adjusted EPS figures of the fiscal year 2020 ending in January and the first six months of the fiscal year 2021 were $1.63 and $0.72, respectively.
To conclude, it’s safe to say that now’s a good time for investors to invest in Snowflake. However, whether or not it stays that way is something that only time will tell.