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I first came across Twilio Inc. after The Motley Fool began to push the company. I started researching the company, but I thought their valuation was nowhere near reality which made me decide to not invest in the company. Considering the stock is down 82.17% year to date, I am glad that I made the decision that I did. Now that Twilio has fallen in value so much this year, I want to take a look at the stock today and see if it's at a good price.
For those who don’t know, Twilio provides programmable communication tools to help connect businesses with customers. It gives customers a better experience when interacting with businesses, and helps those businesses decrease their customer acquisition cost. I do think that Twilio is a valuable tool for business owners.
They currently are valued at $8.62 billion. They are not yet profitable which means that I cannot give what I think the company is worth based off of their earnings. I have to look at revenue. Last year, Twilio brought in $2.84 billion. The year before they brought in $1.76 billion, and the year before that they brought in $1.13 billion. Again, they have not made a profit yet, but I am not concerned about that because they are growing very quickly. With a company growing as fast as Twilio, I believe they should be putting all their revenue back into the business. This year, they have increased their revenue by 43.08% according to macrotrends.net. Obviously, this is some very impressive growth.
Twilio has a price to sales ratio of 2.42 which is actually not bad in my opinion. They also have a price/book ratio of .85 which traditionally, a price/book ratio of less than 1 is considered good. They also have an enterprise value/revenue ratio of 1.65 which investors usually consider an enterprise value/revenue ratio between 1x to 3x as healthy. Twilio does have long term debt of $1.012 billion which should be considered.
With all this in mind, I am definitely considering investing in Twilio. It’s currently on my watchlist. I have not bought any shares of the company yet, but I no longer believe that the stock is trading at a crazy valuation.
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