Over the last six months, Jamf’s shares have sunk to $11.93, producing a disappointing 10.6% loss - a stark contrast to the S&P 500’s 17.5% gain. This may have investors wondering how to approach the situation.
Is now the time to buy Jamf, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Jamf Not Exciting?
Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons you should be careful with JAMF and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Jamf grew its sales at a 16.3% annual rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds.
2. Operating Losses Sound the Alarms
Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.
Jamf’s expensive cost structure has contributed to an average operating margin of negative 7.1% over the last year. Unprofitable software companies require extra attention because they spend heaps of money to capture market share. As seen in its historically underwhelming revenue performance, this strategy hasn’t worked so far, and it’s unclear what would happen if Jamf reeled back its investments. Wall Street seems to be optimistic about its growth, but we have some doubts.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Jamf has shown mediocre cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.7%, subpar for a software business.
Final Judgment
Jamf isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 2.1× forward price-to-sales (or $11.93 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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