Brilliant fundamentals + negative Coppock = time to start buying
Bill.com is another company for which I have great hopes. The fundamentals are outstanding, the shares have recently given a 2B buying signal (golden cross and broken downtrend) and the Coppock indicator has just turned negative.
First let’s look at the fundamentals which are electrifying.
Fiscal 2022 was a transformative year for Bill.com. We significantly expanded our platform solution and extended our reach serving customers ranging from sole proprietors to mid-market companies. We entered new strategic partnerships and began building a global customer base, serving customers in more than 150 countries. We are well-positioned to capitalize on the tremendous market opportunity in front of us.
In fiscal 2022, 400,000 businesses used our solutions to automate their financial operations, get paid faster and better manage their cash flow, more than 3x the number of businesses that used us in the prior fiscal year. We managed more than $225bn in payments and our network grew to 4.7m members that have originated or received an electronic payment through our platform.
Total revenue was $642m, an increase of 169pc year-over-year. Bill.com’s organic core revenue grew 77pc year-over-year and revenue from our spend and expense management solution increased more than 160pc from a year ago.
In addition to top line growth, we expanded our non-GAAP gross margin to 84pc, up 7 percentage points year-over-year. Our non-GAAP net loss of $24m for the year was 70pc lower than our estimate at the start of the fiscal year, as a result of our disciplined approach to growth and solid execution.
There are more than 30m small businesses in the U.S. and 70m globally, and the majority still use manual paper-based processes. With our platform, ecosystem and scale, we are particularly well-positioned to help these millions of businesses transform their financial operations.
In closing, we had a great transformational year. Our TAM [total addressable market] is significant and we plan to continue to invest in creating value for SMBs for the long haul, driving both multi-year revenue growth and profitability. We are laser focused on automating the future of finance so that all businesses can flourish.Q4 2022 18 August 2022
You could not ask for a more positive statement. Bill.com is an incredibly exciting company. The only other thing that has changed in this ‘transformative’ year is that the shares have dropped from a peak $348.5 to $162.90 having been as low as $89.94.
I am not sure exactly how valuable these projections are at a time of such economic turbulence but they give the general drift of what is happening which is explosive growth with sales projected to rise more than 10-fold in five years. The fundamentals for Bill.com are about as good as it gets. The falling share price is all about macroeconomic factors over which the company has no control.
What we know is that Bill.com is a great business, well worth investing in but because of the bear market the shares have been falling. My new theory is that a negative Coppock, even before it turns higher, is telling us that the bear phase is relatively mature. So, from now on, it should be safe for long-term investors to start building a position in the shares.
If they go up you start making money. If they keep falling you wait for the next month’s Coppock indicator to be even more negative and buy some more. If and when Coppock turns higher you buy some more. There are plenty of options all underpinned by two key facts. Fact one – this is a brilliant company. Fact two – they have already endured a severe bear market.
It is a simple strategy but so all the best ones are.
As this bear market becomes more mature my focus is increasingly on highlighting shares in companies with outstanding fundamentals to build buying strategies around. It doesn’t really matter what the strategies are, they should come good in the end driven by those great fundamentals. The strategy discussed here is to assume that once Coppock turns negative we have already had a significant bear phase and the next big swing is likely to be up. Simple observation of past Coppock behaviour across a wide range of investments shows this to be a reasonable assumption. Bill.com looks like a perfect candidate for this approach.