eGain Corp

eGain Corp (NASDAQ-CM: EGAN) is a Software & Computer Services Company offering SaaS (software-as-a-service) solutions to support digital engagement.

Investment Highlights – eGain Corp – Speculative Buy at USD 11.85

• The Company has witnessed a continuous increase in the revenue from SaaS and professional services and expects further growth in the fourth quarter as well.
• In the last one year, the Company delivered a significant return of ~62.11% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, EV/Sales multiple of the eGain Corp is currently lower as compared to the corresponding multiple of the Software & IT Services industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is supporting an upside move (around 45 level), which means the stock price could increase in the short term.

Key Risks

• Due to the Covid-19 crisis, the Company might not be able to deliver the project on time or project cancellations by customers, which could put financial stress on the business.
• Moreover, failure to adopt the technological changes can reduce the level of business. 

Financial Highlights – Q1 FY2021 (30 September 2020) (released on 10 November 2020)

• In the first quarter of the financial year 2021, the total revenue surged by 11% to $19.1 million, reflecting a 29% increase in SaaS revenue.
• The revenue from SaaS and professional services surged by 23% on the year-on-year basis and contribute 91% of the total revenue.
• The net income on GAAP basis increased to $2 million in Q1 FY2021 (Q1 FY2020: $1.2 million), with an increase in basic EPS to $0.07 (Q1 FY2020: $0.04).
• The cash flow from operations increased to $5.7 million for the period (Q1 FY2020: $2.7 million).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance in the first quarter of the financial year 2021. Both the revenue and the net income increased, with higher cash flow from operations. The Company expects total revenue growth between 0% to 3%, with 8% to 11% growth in SaaS revenue in the second quarter of FY2021. eGain expects a net loss of $1 million in GAAP basis in Q2 FY2021. Due to covid-19 pandemic, the Company implemented WFH (work from home) and social distancing policies and cancelled certain marketing and sales events, while did not have any material impact on the operational performance till date. EGAN continues to support customer needs in the best possible way during the crisis. The stock made a 52-week low and high of USD 4.80 and USD 20.88, respectively.

Based on the decent growth prospects, we have given a “Speculative Buy” recommendation on eGain Corp at the closing price of USD 11.85 (as on 26 January 2021).

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer

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