Software provider Appian has many advantages
The Motley Fool’s Take
Appian’s share price recently fell about 74% from its 52-week high, presenting an attractive entry point for risk-tolerant investors.
Appian specializes in “low-code” software that helps companies build apps and workflows for themselves without having to hire in-house developers. Its clients recently included Cigna, Major League Baseball, Merck & Co., T-Mobile US and the US Air Force.
In Appian’s third quarter, total revenue increased 20% year-over-year to $92.4 million, driven by a 32% increase in the subscription revenue segment, at $67.2 million. The bottom line was in the red, however, as Appian continues to spend heavily to support expansion. But with more than $188 million in cash and short-term investments on the balance sheet, the company can afford this strategy.
Appian’s subscriptions are growing in terms of the number of customers and the amount they are willing to spend. Its recently announced 116% net revenue retention rate for cloud subscribers means the average organization that has been with Appian for a year now spends 16% more than it did a year ago.
Appian stock is not for risk averse people as the company is not yet profitable. But with a recent market valuation of around $4 billion, the company has plenty of room for growth. (The Motley Fool owns stock and recommended Appian.)
ask the fool
From NM to Frankfort, Ky.: When a company buys back some of its own shares, what happens to the value of the shares?
The madman responds: It depends. Shareholders can benefit when companies buy back shares – if those shares are undervalued. However, many companies buy back their shares when they are overvalued, which wastes money.
Imagine that Scruffy’s Chicken Shack is worth $100 and has 100 shares outstanding, with each share tied to a dollar of value. If Scruffy’s buys back (essentially retires) 25 shares, 75 will remain, and each will have a larger proportional claim to the company’s future earnings.
Since earnings per share is one of the metrics used to judge “value”, fewer shares usually means value is going up.
From LR, Nampa, Idaho: When we buy shares of a company, where does our money actually go?
The madman responds: You might assume your dollars are going to the business, but you’d be wrong. A company raises money for its publicly traded shares when it first issues them to investors through an initial public offering. After the IPO, the shares will be traded on the exchange, bought and sold by investors through intermediaries who get a share of each transaction. Companies sometimes issue “secondary” offerings of shares, raising money when these new shares come to market. But after that, the shares are again simply exchanged between investors.
It’s kind of like collectible comics. If you buy a comic when it’s published, the publisher gets your money back. But after that, the comic could be traded between collectors, its value rising or falling depending on what they think it’s worth, depending on supply and demand. The publisher, like the stock company, no longer receives money from the comic.
school of fools
Throughout our lives, various happy and sad events have tax repercussions that should not be overlooked.
For starters, when you start a new job, complete your W-4 form appropriately to avoid having too many or too few deductions from your paycheck. If you have other significant income (perhaps from rental properties or dividends), you may have withheld more in anticipation of a bigger tax bite. If you expect large deductions and a lower tax bill, you may want fewer withholdings.
When you change jobs, don’t cash out your 401(k) account if you can. Even if your account is small, transfer the money in it to your next employer’s plan or transfer it to an IRA so it can continue to grow for you over time. Most of us will need all the retirement assets we can amass.
If your marital status changes, your Form W-4 should also change. You will also need to determine whether you want to file your tax returns jointly or separately. If you both work and file your returns jointly, as most couples do, you could be hit with the “marriage penalty”, resulting in more tax liability than if you both had filed as singles. However, filing jointly is preferable for most couples. Tax preparation software or online calculators can help you determine the best way to file your returns.
If you get divorced, update this W-4 form again. Remember that when assets are divided, so are the tax liabilities associated with them. Assets sold can result in capital gains – and taxes on them. Taxation related to alimony has changed in recent years, so educate yourself on the subject (or consult a tax specialist) to determine if your alimony paid is deductible or if the alimony received should be considered taxable income.
Other life events, such as the birth or adoption of a child, buying or selling a home, education expenses, estates and retirement have tax implications. Learn more at IRS.gov or consult a tax professional.
My dumbest investment
From OP, online: My dumbest investment? Cannabis stocks – they just messed me up. I held on, though, because it’s not a loss until you sell.
The madman responds: Successful investing involves buying into big companies at the right time – when they’re undervalued – and then hanging on.
Many investors reasonably assume that cannabis stocks hold great promise as marijuana legalization becomes more widespread in the United States and may even occur nationwide. But cashing in on the booming industry isn’t necessarily so easy.
The cannabis industry is still developing, and it is not yet clear which cannabis companies will ultimately dominate in the long term. If you want to invest in cannabis but aren’t sure which companies will perform best, consider stocks in an exchange-traded fund that focuses on that. (ETFs are funds that trade like stocks; you can buy them through a brokerage account.)
There are many cannabis-focused ETFs, such as AdvisorShares Pure US Cannabis ETF, which recently spread its assets across several dozen different companies, all based in the US. The fund has been around since September 2020 and has an expense ratio (annual fee) of 0.73%.
You’re right that you haven’t suffered any loss if you haven’t sold yet. If you’re optimistic about the future of cannabis, reevaluate your stocks and maybe hang in there. If another sector looks more promising, move your money.
Who am I?
My roots date back to my inception as a private equity firm in 2001. Since then, myself or my affiliates have invested in dozens of franchise and multi-location brands that generate a total of $61 billion in revenue annual. Together they have 66,000 locations in 50 states and 89 countries. I recently claimed $33 billion in assets under management. Names in my portfolio include Arby’s, Auntie Anne’s, Basecamp Fitness, Baskin-Robbins, Buffalo Wild Wings, Carvel, Cinnabon, Dunkin’, Jamba, Jimmy Johns, Maaco, Massage Envy, Merry Maids, Sonic and The Cheesecake Factory. I take my name from the writings of Ayn Rand. Who am I?
Don’t remember last week’s question? Find it here.
Answer to last week’s quiz: Tupperware brands