Ziggma Stock Screener: Why Zoom Video Stock Has a Score of 96

In the last two articles, we have seen why Ziggma’s quantitative stock research algorithm has assigned a high score to companies such as Sempra Energy, Facebook, NVIDIA, and Arista Networks.  Ziggma provides a next-gen investment portfolio tracker platform where users can leverage tools such as its free stock screener to identify top-performing stocks and ETFs. At the portfolio level, Ziggma’s portfolio visualizer provides cutting-edge portfolio analytics and monitoring tools. 

Users will also have access to professional-grade fundamental data which will help them accelerate their investment decisions. The combination of best-in-class stock research tools and data makes Ziggma one of the best stock research sites on the market. 

Here, we take a look at another high-flying tech stock with a Ziggma score of 96 – which is Zoom Video Communications.

Zoom Video is a collaboration giant

Zoom Video provides a video-first communications platform in the Americas, Asia-Pacific, Europe, Middle East, and Africa. Its Zoom Meeting business offers HD video, voice, chat, and content sharing across several devices including mobiles, desktops, laptops, and conference room systems. The Zoom Phone is an enterprise cloud phone system that provides secure call routing, call queuing, recording, monitoring, voicemail, and switch to video among others.

Further, Zoom Chat enables users to share messages, images, audio files, and content on desktop, laptop, tablet, and mobile devices. Zoom Rooms is a software-based conference room system and Video Webinars allow you to provide presentations to large audiences.

The shift towards remote work has accelerated at a great pace due to the ongoing pandemic which has driven top-line growth of collaboration service providers such as Zoom Video higher.

This allowed Zoom Video to increase its sales from $330 million in fiscal 2019 to $623 million in fiscal 2020 and $2.65 million in fiscal 2021. This stellar rise in revenue has also helped Zoom Video to increase its operating profits from just $6.16 million in fiscal 2019 to $659.84 million in 2021.

Due to its spectacular revenue growth in the last few quarters, ZM stock rose from $67 per share at the start of 2020 to $588 per share last October. However, investors were soon worried about its decelerating growth rates and steep valuations. Right now, ZM stock is trading at $342.66 which is 40% below its all-time high.

How does ZM stock score on important metrics?

Currently, valued at a market cap of $101 billion, Zoom stock seems to be trading at a significant discount to consensus price target estimates. Analysts expect ZM stock to trade around $417 per share which is over 20% above its current trading price.

Wall Street forecasts ZM sales to rise by 48.3% to $3.93 billion in fiscal 2022 and by 19% to $4.7 billion in fiscal 2023. It suggests Zoom stock is valued at a forward price to sales multiple of 26.6x and a price to earnings multiple of 79x which is steep.

According to Ziggma’s stock screener, the industry in which Zoom Video operates shows a projected growth rate of 8.72% indicating ZM is growing at a far higher pace. Zoom’s solid return on assets ratio of 12.69% reflects its improving profit margins. Ziggma has scored Zoom highly in terms of growth (99) and profitability (99) but very low on valuation (10). 

The overall score, the strong performance on growth and profitability versus industry peers more than compensate for the high relative valuation.

Recent Q1 results

In the first quarter of fiscal 2022, Zoom Video reported revenue of $956 million, which was a growth of 191% year over year. Adjusted earnings per share also rose exponentially to $1.32 from $0.20 in the year-ago period. In fact, Zoom’s adjusted earnings beat consensus estimates by 33% in Q1.

The company’s management expects growth to decelerate in the upcoming quarters and forecast top-line to rise by 50% this fiscal year.

Zoom has managed to hold its own in a space that has attracted tech giants such as Google, Microsoft, and Cisco. In fact, market research company Gartner has named Zoom a Leader in its Magic Quadrant for Meeting Solution. Zoom was also named as a preferred video-conferencing application by Okta in its Businesses at Work report.

In the past few quarters, Zoom’s sales were driven by new customer sign-ups. However, in Q1 of fiscal 2022, revenue growth was more or less split between new and existing customers. The collaboration heavyweight confirmed that existing customers accounted for 43% of incremental sales. In the second quarter of fiscal 2021, this number stood at just 19%.

Going forward, Zoom will have to bank on increased customer spending to offset falling customer additions. In Q1, Zoom reported a net dollar retention rate of 130% in the trailing12-month period. A positive retention rate suggests existing customers are spending more on the platform. Further, the number of Zoom customers that generate over $100,000 in sales rose by 160% to 2,000 at the end of Q1.

We can see why analysts remain bullish on ZM stock despite its already steep valuation. In order to analyze other high-ranking stocks on Ziggma, you can sign-up right here.