How are energy investors positioned?
On Wednesday, Mizuho (NYSE:MFG) initiated coverage on OneStream Inc. (NASDAQ:OS), assigning the company an Outperform rating and setting a price target of $30.00. Currently trading at $21.26, the company maintains a strong financial position with more cash than debt on its balance sheet. The research firm’s analysts highlighted OneStream’s unified Corporate Performance Management (CPM) platform, which facilitates financial close, planning, reporting, and analytics processes. The platform is recognized for its potential to replace older systems and integrate artificial intelligence into financial offices. According to InvestingPro data, the company boasts a healthy current ratio of 2.36, indicating strong short-term liquidity.
OneStream’s market position is seen as favorable due to its ability to replace legacy systems and offer solutions that span across various market segments. While the stock has experienced a 28% decline over the past six months, analysts from Mizuho forecast a compound annual growth rate (CAGR) of approximately 20% in revenue through 2028. They anticipate an expansion in operating margins to around 12% and free cash flow (FCF) margins to approximately 20%. The firm considers the projected 20% year-over-year growth in 2025 to be a conservative estimate, particularly given OneStream’s impressive recent revenue growth of 30.54% in the last twelve months.
The analysts at Mizuho believe that OneStream has multiple avenues for growth within a large total addressable market (TAM) estimated at $35 billion. They point to the displacement of outdated systems, expansion into smaller market segments, and opportunities for cross-selling as key drivers for the company’s sustained growth trajectory.
OneStream’s competitive edge and its pathway to profitability were emphasized as reasons for the positive outlook. Mizuho sees OneStream as an appealing small to mid-cap (SMID cap) growth story, recommending the stock as a long-term investment. The firm’s analysis suggests that OneStream is well-positioned to continue its growth and capture a significant share of the CPM market.
In other recent news, OneStream, Inc. reported significant financial developments, with fourth-quarter revenue rising to $132.5 million, a 29% increase from the previous year. Despite this revenue growth, the company faced a substantial GAAP operating loss of $47.4 million, attributed largely to increased equity-based compensation expenses. For the fiscal year 2024, total revenue climbed by 31% to $489.4 million, though the GAAP operating loss widened to $319.5 million. In response to these results, JPMorgan downgraded OneStream’s stock from Overweight to Neutral, citing deal slippage and cautious data points. Meanwhile, BMO Capital Markets adjusted its price target for OneStream to $34.00, noting a moderate revenue upside and improved margins in the fourth quarter. Stephens initiated coverage with an Overweight rating, highlighting OneStream’s potential for growth in the software market for financial officers. Additionally, OneStream achieved FedRAMP High authorization, enhancing its position in providing secure cloud solutions for government finance teams. The company also announced executive management changes, with co-founder Craig Colby transitioning to chief success officer and CEO Thomas Shea assuming the role of president.
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