App Operational Software – a new company to buy?

Narrative:  5G / IOT
Product Family:  Aggressive Growth

3 newer companies have surfaced as potential speculative investments within the IOT narrative:  SUMO, DT and FROG (FROG and SUMO are recent IPOs)

Objective:  Each of these 3 companies have a compelling technology and are positioned to ride the modern application / infrastructure evolution, which of the 3 is the better investment for 12-24 month aggressive (high risk) capital appreciation?  This post represents part 1 to filter out which of the 3 is best suited for additional deep dive (if any).

Business overview – per Simply Wall St (link)

  • SUMO:  Sumo Logic, Inc. provides cloud-native software-as-a-service platform that enables organizations to address the challenges and opportunities presented by digital transformation, modern applications, and cloud computing. Its platform enables organizations to automate the collection, ingestion, and analysis of application, infrastructure, security, and IoT data to derive actionable insights. The company offer a suite of solutions to address areas, such as operational intelligence, security intelligence, business intelligence, and global intelligence.
  • DT:  Dynatrace, Inc. provides a software intelligence platform for the enterprise cloud applications. It operates Dynatrace, a platform for running and optimizing multi-cloud environments. Its products include AppMon that works in various application environments, such as mobile apps, web apps, web browsers, web servers, Java, .NET, Node.js, PHP, databases, middleware, and mainframe; and Classic Real User Monitoring, which tracks user’s experience from an edge devices comprising smart phones, tablets, PCs, or kiosk through cloud services, as well as customer’s web tiers. The company also provides Synthetic Classic, which offers customer experience, as well as is used to monitor application and application program interface availability and performance; and Network Application Monitoring that provides enterprise applications, network services, user experience, and application delivery across wide-area networks. Its platform allows its customers to modernize and automate IT operations, develop and release software, and enhance user experiences. The company also offers implementation, consulting, and training services. Dynatrace, Inc. markets its products through a combination of direct sales team and a network of partners, including resellers, system integrators, and managed service providers. It serves customers in various industries comprising banking, insurance, retail, manufacturing, travel, and software. 
  • FROG:  JFrog Ltd. provides DevOps platform to achieve continuous software release management platform enabling organizations to deliver software updates across any system in the United States. Its platform acts as bridge between software development and deployment, which enable organizations to build and release software faster. The company’s products include JFrog Artifactory, a package repository that allows teams and organizations to store, update, and manage their software packages at any scale; JFrog Pipelines to secure packages; JFrog Distribution that provides software package distribution with enterprise-grade performance; JFrog Artifactory Edge that utilizes and leverages metadata from JFrog Artifactory to facilitate the transfer of the incremental changes in software packages from their previous versions; JFrog Mission Control, a platform control panel that provides a view of moving pieces of an organization’s CSRM workflow; and JFrog Insight, a DevOps intelligence tool. Its products also comprise JFrog Pro, JFrog Pro X, JFrog Enterprise, and JFrog Enterprise Plus products that offer ongoing updates, upgrades, and bug fixes, as well as cluster configuration, multi-site replication, and SLA support. 

Crow$ Descriptions

  • SUMO – recent IPO in DevOps tools differentiation on Security 
  • DT – app observability across cloud infrastructures – x-cloud monitoring
  • FROG – recent IPO in DevOps and continuous releases cycles (artifact reuse too) 

High Level Comparisons

Seeking Alpha

Company Name 
Sector 
Industry 
Market Cap 
Enterprise Value 
Employees 
SA Authors Covering 
Wall St. Analysts 
Ratings 
Dynatrace, Inc. 
Information Technology 
Application Software 
11.03B 
11.31B 
2,243 
5 
20 
SUMO 
Sumo Logic, Inc. 
Information Technolo 
Application Softwan 
2.74B 
2.33B 
710 
4 
9 
SUMO

Simply Wall St

months 
SNOWFLAKE ANALYSIS 
See All Risk Checks 
VALUE 
SNOWFLAKE ANALYSIS 
VALUE 
see All Risk 
SNOWFLAK
Dynatrace, Inc. (DT) X 
Sumo Logic, Inc. (SUMO) 
x 
JFrog Ltd. (FROG) 
Performance vs Valuation Benchmarks 
jea 
70.0% - 
60.0% 
50.0% 
SUMO 
40.0% - 
30.0% 
138.2 M 
X Axis 
Revenue Forecast 
20.0% ...............t... .........................t.............- 
338.2 M 
Y Axis 
538.2 M 
Revenue Growth 
@ Summary Table 
PROJECTIONS 
Name 
RISK 
MARKET VIEW 
Revenue 
Forecast 
Q-REVIEW 
EBIT Forecast 
O Size 
Revenue 
Net Income 
Forecast 
EPS I
SymbolDTSUMOFROG
Symbol NameDynatrace IncSumo Logic IncJfrog Ltd
ExchangeNYSENASDAQNASDAQ
Open38.9627.0468.14
High39.4427.7968.70
Low38.4725.8066.01
Last39.0926.7568.34
Change0.38-0.820.16
% Change0.98%-2.97%0.23%
Volume2,295,526951,6001,120,200
20-Day Average Volume2,165,5251,809,8201,698,100
Previous Close38.7127.5768.18
IndustryIT ServicesInternet – SoftwareInternet – Software
Has OptionsYesYesYes
20-Day Moving Average37.7023.8265.74
20-Day Raw Stochastic68.73%58.35%68.00%
20-Day Relative Strength52.19%56.10%51.38%
Weighted Alpha53.80N/AN/A
Today’s Opinion8% BuyN/AN/A
Previous Opinion8% SellN/AN/A
Last Month’s Opinion24% SellN/AN/A
5-Days %Chg-1.11% since 12/04/20-11.16% since 12/04/20+0.32% since 12/04/20
5-Days Low37.91 on 12/10/2024.25 on 12/07/2065.68 on 12/10/20
5-Days High41.11 on 12/08/2032.44 on 12/07/2073.61 on 12/07/20
1-Month %Chg+8.61% since 11/11/20+37.18% since 11/11/20+11.94% since 11/11/20
1-Month Low34.65 on 11/13/2018.78 on 11/13/2057.14 on 11/23/20
1-Month High41.11 on 12/08/2032.44 on 12/07/2073.61 on 12/07/20
3-Month %Chg-0.10% since 09/11/20-0.48% since 09/17/20+5.48% since 09/16/20
3-Month Low33.83 on 11/10/2016.71 on 10/30/2057.14 on 11/23/20
3-Month High45.18 on 10/14/2032.44 on 12/07/2095.20 on 10/26/20
6-Month %Chg+10.30% since 06/11/20-0.48% since 09/17/20+5.48% since 09/16/20
6-Month Low33.83 on 11/10/2016.71 on 10/30/2057.14 on 11/23/20
6-Month High48.85 on 09/02/2032.44 on 12/07/2095.20 on 10/26/20
Market Capitalization, $K11,027,1322,737,0076,060,050
Shares Outstanding, K282,096102,31888,675
Annual Sales545,800,000155,056,000580
Annual Net Income-418,020,000-92,137,000-719,870
Last Quarter Sales168,590,00049,415,00038,890,000
Last Quarter Net Income17,480,000-12,217,000-5,270,000
60-Month Beta1.50N/AN/A
Most Recent Earnings0.18 on 10/28/200.06 on 12/07/200.05 on 11/04/20
Latest Earnings Date02/03/2112/07/2002/03/21
Most Recent DividendN/AN/AN/A
Next Ex-Dividends DateN/AN/AN/A
Price/Earnings ttm107.530.000.00
Downloaded from Barchart.com as of 12-13-2020 01:30pm CST   
DT 
GO 
Range: ID 50 1M 3M 6M 9M IY 2Y 3Y 5Y 10Y 20Y MAX 
Extended Hours (Intraday) Real-Time (Cboe BZX) 
128/2020 DT .32% FROG 33.28 % 
Frequency: Daily 
Date:

DT – orange, SUMO – blue, FROG – grey

Valuation Comparisons

Valuations based on past performance are not meaningful given new companies with limited history – Simply Wall St

FinBox

@ Summary Table 
PROJECTIONS 
Name 
Search Values 
DT 
Dynatrace, Inc. 
FROG 
RISK 
MARKET VIEW 
Stock Price 
(Current) 
$39.09 
$68.34 
Q-REVIEW 
Fair Value 
(Finbox) 
$36.45 
NM 
Fair Value 
(Analyst Target) 
$50 
$80 
Market Cap 
11.027 B 
6.232 B

Confidence:  DT = Med, SUMO and FROG = Very Low

Given the characteristics of the 3 companies, (only DT has any public historical audited data), different metrics are needed as the traditional rearview mirror analysis is not possible.

First pass set:

  1. Revenue growth actual
  2. Revenue growth estimates
  3. Profit / Loss change – more cash flow than income
  4. R&D spends vs Rev
  5. Rev per Employee
  6. Common shares outstanding (full dilution)
  7. Revenue over debt

Working primarily from Finbox.io data and in some cases SA, the following was pretty quickly put together – colored cells are indicators Green = Best

ROG 
2800% NM 
SUMO 
36 
I. Revenue growth actual 
2. Revenue growth estimates 
3. Spreadsheet Usage: Operating Cash Flow Margin 
4. Spreadsheet Usage: Research and Development Margin 
5-a. Revenue 
5-b Employees 
Rev / Employees 
6. Common shares outstanding (full dilution) 
7. Revenue less debt 
7-æ Total debt 
s s 19280 
S271S5 
007738 042929 023798 014142 
SUMO SUMO SUMO SUMO 
-04242Z 
FROG FROG FROG FROG 
014972 008468 008048 027717 
S137_IO 
s 4809 
S 138.90 —common stock outstanding - quarterly 
0281 
o c02 
0281 
o c02 
SUMO 
FROG 
0281 
0281 
o c02 
0081

Across these metrics, looking at only the last 4 quarters, SUMO is the obvious better selection.

Part 2 will focus on a deep dive into SUMO (trading the stock along the way is planned)

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