Is Workday (WDAY) making money?

Business-cloud solution provider Workday (WDAY) is benefiting from coronavirus and the work-from-home revolution.

In 2020, Workday’s stock rose from $167.46 on 2 January to $208.41 on 12 September. In contrast, Workday (NASDAQ: WDAY) fell to $113.87 on 18 March 2020. In addition, Workday hit a high of $243.88 on 28 August 2020.

Workday Inc. (NASDAQ: WKDY); however, loses money. Workday reported a quarterly operating loss of -$16.75 million on 31 July 2020. Conversely, that quarterly operating loss fell from -$146.10 million on 31 January 2020.

Workday Grows and Loses Money

Workday is experiencing astounding revenue growth. Stockrow estimates Workday’s revenues grew by an impresive 19.62% in the quarter ending on 31 July 2020.

Yet Workday’s revenue growth is falling. Workday’s revenues grew by 23.43% in the quarter ending on 30 April 2020 and 23.8% in the quarter ending on 31 January 2020.  

Interestingly, Workday’s profits grew in 2020. Workday’s quarterly gross profit grew from $691.52 million on 31 January 2020 to $712.75 million on 30 April 2020 to $777.69 million on 31 July 2020.

Conversely, Workday’s quarterly net loss grew from -$127.96 million on 31 January 2020 to -$158.37 million on 30 April 2020. However, that quarterly loss fell to -$28.02 million on 31 January 2020.

Is Workday Generating more cash?

Workday has less cash despite the shrinking losses. For instance, Workday’s quarterly operating cash flow fell from $297.11 million on 31 January 2020 to $263.68 million on 30 April 2020. That quarterly operating cash fell to $157.21 million on 31 January 2020.

In contrast, the quarterly ending cash flow rose from -$182.14 million on 31 January 2020 to $1.22 billion on 30 January 2020. Yet that quarterly ending cash flow fell to $28.12 million on 31 July 2020.

The cash shows Workday could take on enormous amounts of debt. Workday’s quarterly financing cash flow went from $62.21 million on 31 January 2020 to $499.33 million on 30 April 2020 to $70.78 million on 31 July 2020.

On the other hand, Workday had more cash in the bank. For instance, Workday had $2.754 billion in cash and short-term investments on 31 July 2020. That number grew from $2.599 billion on 30 April 2020 and $1.945 billion on 31 January 2020.

Workday had $7.501 billion in total assets on 31 July 2020. Thus I consider Workday a cash-rich company for its size. However, I think Mr. Market overpriced WDAY at $207.31 on 11 September 2020. In my opinion, Workday does not have enough cash to justify the $207.31 price.

What is Workday (WDAY)?

I think investors love Workday (NASDAQ: WDAY) because it makes cloud-based human resources (HR), finance, planning, business intelligence, and analytics solutions.

Thus organizations could use Workday’s systems to support people working from home. For example, Workday’s HR finance apps could process payroll and expense reports for home workers.

In addition, Workday could make business intelligence, marketing statistics, and finance data available to people working from home. Moreover, Workday offers desk board that could make such resources available to home workers.

Finally, Workday offers division manager dashboards that allow bosses to supervise employees working at home. In particular, Workday offers financial management, analytics and reporting, human capital management, enterprise planning, spend management, and talent management solutions.

Can Workday profit from Home Schooling?

In addition, Workday can profit from home schooling with its student and professional services automation solutions.

Moreover, school systems could use Workday’s platform and product extensions to expand their existing systems to cover students, teachers, and administrators who are working at home. Plus, Workday’s payroll and workforce management apps can help school districts manage teachers and administrators at home.

Education is an enormous market for Workday (WDAY). In fact, EdWeek estimates there were 130,930 kindergarten through 12th grade schools in the United States in the 2017-2018 school year.

How Workday can Profit from Government

Likewise, any government could use Workday’s cloud solutions to support bureaucrats’ working at home. Local government is another enormous market for Workday.

The National League of Cities (NLC) estimates there were general purpose 39,044 local governments in the United States. General purpose local governments include cities, towns, villages, townships, parishes, and counties.

Moreover, the NLC estimates there 50,432 special purpose districts including 13,726 school districts and 1,452 city or county school systems in the United States. There were also 37,381 special districts in the USA. Beyond local governments, there are 50 state governments in the United States.

Thus both government and education are enormous markets that Workday could tap. I think Workday is an interesting company with a growing market for its products.

However, I advise investors to avoid Workday because Mr. Market grossly overprices it. I think this means Workday has no margin of safety. In the final analysis, I think Workday (NASDAQ: WDAY) stock is too unstable and overpriced for ordinary people to rely on.

Originally published at https://marketmadhouse.com on September 14, 2020.