Growth stock Smartsheet is nearing a buy point of 48.55 after a monthlong consolidation. It surged in reaction to an earnings surprise last week, when the software-as-a-service (SaaS) provider posted its first profitable quarter.
Shares rebounded in heavy volume above the 50-day line in a 17% rally last Wednesday, in bullish action for the stock. The rally gap lifted the relative strength line to 10-month highs as well. Smartsheet is Monday's IBD 50 Stocks To Watch pick.
On Monday, the IBD 50 growth stock added a small gain in low volume and could be setting up for a breakout.
It boasts an 89 Composite Rating and 92 Relative Strength Rating. Sales have grown over the past eight quarters, leading to its first profit in Q4 2022. The latest quarterly sales grew 35% year over year to $212.3 million, while the 7 cent per share profit marked a turnaround.
Analysts expect $214.1 million in sales in Q1 2023 on a profit of 8 cents per share.
Growth Stock Partners With Big Clients
Smartsheet offers planning, viewing and collaborative tools for work in real time.
Its software-as-a-service tool provides customizable views of how tasks move from beginning to end. The product line features planning tools for managing people, human resources and deadlines, in both standard grid and calendar views. The service also lets users collaborate, integrate and automate numerous work-related processes.
The platform can be used for different purposes, including managing inventory or tracking budgets, breaking down expenses and planning projects. It has an automation feature for repetitive processes like invoice collection and employee recordkeeping.
It works with DocuSign, Salesforce and ServiceNow software tools. And it can sync with everyday tools like Google Gmail, Google Drive and Microsoft Teams.
In addition, the growth stock has partnered with Microsoft through several updates, including Microsoft Office 365.
In September, Washington State-based Smartsheet bought Outfit, its fifth purchase in four years, adding brand management, templating and creative automation tools. Earlier, it acquired Converse.AI, Slope, 10,000ft and Brandfolder.
Future Looks Bright
According to Acumen Research Consulting, the global workflow automation market reached $12 billion in 2021 and will hit $79 billion by 2030. Fast-growing demand among businesses for reducing cost through automation and speeding up sales and billing are tailwinds for niche players like Smartsheet.
Mutual funds own 72% of the growth stock and more funds added it over the past three quarters. The stock is in the Computer Software-Enterprise group, which ranks 83rd among IBD's 197 industry groups.
Exchange-traded funds hold the stock as well, including Vanguard information technology ETF and the iShares US technology ETF.
Please follow VRamakrishnan on Twitter for more news on the stock market today.
