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Monday, August 15, 2022

Sumo Logic, Inc. (SUMO) Stock a Riskier Investment Option

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Sumo Logic, Inc. (SUMO) is empowering the individuals who control advanced, digital businesses via its SaaS analytics portfolio. The company enables its clients to deliver secure and reliable cloud-native apps. The company is ranked at 149th spot in the application software industry, which includes a total of 175 companies. The application Software Industry was worth 168 billion in 2019 and is anticipated to reach 1039 billion by 2027, at an annual growth rate of 25.5% from 2020 to 2027.

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SUMO: Recent Developments

On April 21, SUMO updated the ‘Sensu Integration Catalog’, which is an open-source offering and is available on GitHub. It is an open, self-service market including up to 40 turn-key integrations and is built to hasten production-ready infrastructure and app monitoring. Sensu Integration Catalog displays its pledge to the open-source community and asks the developers to contribute.

SUMO: Earnings

The company’s revenue chart shows that its revenue grew year on year. Most recently, for fiscal 2022, its revenue was recorded to be $242 million with a 19.5% improvement. The earnings per share of the company observed a gain during FY22, as compared to FY21, while for the fiscal years 2020, 2019, and 2018, its EPS declined over the years. The current EPS was -$1.13 with a 31% increase. For FY23, it estimates the revenue and EPS to remain at $290 million and -$0.67.

Comparison with Peers

When SUMO’s one-year performance is compared with its competitors including BTRS, ALKT, MTLS, CRNC, and EGHT, it becomes clear that the company performed negatively, but among its peers, it performed exceptionally well excluding MTLS.

Insider Transactions and Analyst Ratings

The company owns approximately 114 million outstanding shares, of which the percentage of the shares held by different institutional investors is 70.9%, while 4.5% of the outstanding shares are being held by the insiders. Rosenblatt’s analyst Blair Abernethy maintained the company’s ratings to buy and lowered its price target from $27.0 to $21.0.

Risk Factors

SUMO’s earnings are expected to decelerate by an average of 3.1% for the next three years, which poses a real risk for the investors. Also, it has no significant chance of becoming profitable over the next three years, shares have been diluted in the past, and considerable insider transactions held during the last three months.

Bottom Line

Although the company is rated by the reputed analysts as a buy, its earnings are forecasted to decline over the next three years. So, the investors should think twice before investing.

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