No Need to Be a Tech Hot Name

Last Wednesday, July 24th, marked the worst performing day of the Nasdaq index this year, primarily due to mixed earnings results from Alphabet and Tesla.

It was also the IPO day for OneStream, a financial software company that offers a cloud platform used by corporate finance teams for their daily operations. OneStream’s software enhances efficiency in common accounting tasks such as reconciliation and provides analytics features that allow finance teams to simulate the impact of future business decisions on the bottom line.

Coming into its IPO, OneStream boasted over 1,400 customers and reported $406M in revenue over the last twelve months, with a notable growth rate of 37% during this period (among the fastest growth rates for publicly traded companies). In line with many tech IPOs, OneStream is not yet profitable but is moving in a positive direction, reducing its loss from $65M in 2022 to $29M in 2023.

And jumping on the AI bandwagon, OneStream mentioned AI 72 times in its IPO prospectus, mostly highlighting the ML tools integrated into its software. For example, a grocer like Costco can use these tools to predict the amount of perishable food it will sell in a given week, aiding in inventory management.

But what was truly remarkable about OneStream’s IPO was that, in stark contrast to the tech market’s performance last Wednesday, its stock soared by 37%, propelling its valuation to $6.0B or 14.8x ltm revenues.

Conclusion

The KKR-controlled, Birmingham, Michigan-based OneStream may not be a household name, but its success indicates that, despite ongoing macroeconomic challenges and high interest rates, investors are still interested in tech companies with solid fundamentals.

Tech companies do not have to be the latest hot thing to be worth examination!