Atlassian Stock at 21% Discount, Worth Buying?
Atlassian (TEAM) stock deserves your consideration. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price. Here is some data.
- Revenue Growth: Atlassian saw growth of 19.5% LTM and 22.2% last 3 year average, but this is not a growth story
- Recent Profitability: Nearly 27.6% operating cash flow margin and -3.6% operating margin LTM.
- Long-Term Profitability: About 27.6% operating cash flow margin and -5.1% operating margin last 3 year average.
- Available At Discount: At P/S multiple of 8.5, TEAM stock is available at a 21% discount vs 1 year ago.
While revenue growth helps, this is not a growth perspective. Pricing power and high margins generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. Market tends to reward that.
As a quick background, Atlassian provides software solutions for workflow management and remote team collaboration, including tools for planning, tracking, organizing, and sharing work effectively.
| TEAM | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Application Software | – |
| PS Ratio | 8.5 | 3.2 |
| PE Ratio | -250.6 | 23.7 |
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| LTM* Revenue Growth | 19.5% | 5.6% |
| 3Y Average Annual Revenue Growth | 22.2% | 5.3% |
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| LTM* Operating Margin | -3.6% | 18.8% |
| 3Y Average Operating Margin | -5.1% | 18.2% |
| LTM* Op Cash Flow Margin | 27.6% | 20.3% |
| 3Y Average Op Cash Flow Margin | 27.6% | 19.8% |
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| DE Ratio | 2.6% | 21.0% |
*LTM: Last Twelve Months
But do these numbers tell the full story? Read Buy or Sell TEAM Stock to see if Atlassian still has an edge that holds up under the hood.
The question isn’t where TEAM stock goes, but how your portfolio is positioned. See how Trefis High Quality Portfolio and our Boston-based, wealth management partner prepare you.
Stocks Like These Can Outperform. Here Is Data
Here is how we make the selection: We consider stocks > $10 Bil in market cap, and then include those with high CFO (cash flow from operations) margins or operating margins. We additionally consider only those stocks that have meaningfully declined in valuation over the past 1 year.
Below are statistics for stocks with this selection strategy applied since 12/31/2016.
- Average 12-month forward returns of nearly 19%
- 12-month win rate (percentage of picks returning positive) of about 72%
But Consider The Risk
Team’s stock isn’t immune to market turmoil. It fell about 30% in the 2018 correction, lost just over 21% during the Covid pandemic selloff, and took a much bigger hit of nearly 75% in the inflation shock. Even with solid fundamentals, these dips show the risks. When volatility spikes, even strong stocks like Team can see steep declines.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read TEAM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.