Summary
- Vertex has seen a successful public offering as investors like the promise of a growth tax specialist.
- Valuations are quite steep even as the company has a great growth runway, yet I am a bit concerned by an elevated multiple and elevated stock-based compensation expense.
- I like the business, yet the current risk-reward is not compelling enough for me to consider the shares here and now.
- Looking for more stock ideas like this one? Get them exclusively at Value In Corporate Events. Get started today »
Vertex (VERX) is an interesting company which has just gone public. I like the growth runway of the business and its profile, yet valuation multiples are quite elevated, certainly as the recently elevated stock-based compensation expense is casting a real shadow on the bottom line. All of this makes that I am not in a rush to buy shares here and now on the secondary market.
Accelerate Global Commerce
The header of this paragraph is the vision of the company, with the company being a pioneer in tax technology for some four decades. The company has 4,000 customers in more than 100 countries across the globe, with very high retention and subscription revenue percentages.
The company delivers tax solutions for these clients enabling them to transact, grow and comply with laws and regulations. Vertex aims to automate indirect tax processes including sales tax, use tax and VAT as these laws bring in more than $3.5 trillion in annual tax revenues.
With businesses becoming more global, more regulations seen and compliance becoming much more of an issue, Vertex's solutions are in great demand as it incorporates 300 million effective tax rules.
The company relies heavily on ERP and CRM partners to distribute its software, having partnered up with companies like Adobe (NASDAQ:ADBE), Coupa (NASDAQ:COUP), Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), SAP (NYSE:SAP), Salesforce (NYSE:CRM) and Workday (NASDAQ:WDAY), among many others.
