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How A Slowing HCM Business Is Hurting Workday

Workday (NASDAQ:WDAY), a provider of cloud-based human capital management and financial management software applications, saw its stock decline by ~14% over the last week, posting a drop of 12% in Wednesday’s trading alone. The sell-off came following the company’s analyst day event, with indications that its bread-and-butter Human Capital Management (HCM) software business could see slower growth this year. Separately, investors have been more circumspect about high-growth/ high P/E companies in the cloud software space, amid macroeconomic uncertainty with the ongoing trade war and concerns that a recession could be lurking around the corner. For perspective, Workday trades at ~90x its projected 2020 adjusted EPS (FY ends January) Below, we take a look at the company’s financial performance over the last few years and what the outlook could be like.

View our interactive dashboard analysis on Why Has Workday Stock Has Been Trending Lower?

How does Workday’s Revenue Growth in 2019 compare with that in prior periods and what’s the forecast?

Total Revenues for Workday substantially increased from $2.14 Bil in 2018 to $2.82 Bil in 2019; an increase of 31.7%. This compares with Total Revenues growth of 36.1% in 2018 compared to 2017. We expect Total Revenues growth to be 27.6% in 2020.

How does Workday’s Total Expense Growth in 2019 compare with that in prior periods and what’s the forecast?

Total Expense for Workday substantially increased from $2.46 Bil in 2018 to $3.25 Bil in 2019; an increase of 32.1%. This compares with Total Expense growth of  25.4% in 2018 compared to 2017. We expect Total Expense growth to be 25% in 2020.

How does Workday’s EBT in 2019 compare with that in prior periods and what’s the forecast?

EBT for Workday declined from -$315 Mil in 2018 to -$424 Mil in 2019. We expect EBT to decline to -$450 Mil in 2020.

How do Workday’s Net Income and EPS in 2019 compare with that in prior periods and what’s the forecast?

For more information on Workday’s Net Income and EPS, view our interactive dashboard analysis.

 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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