Commvault Systems currently trades at $155 and has been a dream stock for shareholders. It’s returned 246% since December 2019, tripling the S&P 500’s 80.8% gain. The company has also beaten the index over the past six months as its stock price is up 31.3% thanks to its solid quarterly results.
Is now the time to buy Commvault Systems, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.We’re glad investors have benefited from the price increase, but we don't have much confidence in Commvault Systems. Here are two reasons why we avoid CVLT and a stock we'd rather own.
Why Is Commvault Systems Not Exciting?
Originally formed in 1988 as part of Bell Labs, Commvault (NASDAQ: CVLT) provides enterprise software used for data backup and recovery, cloud and infrastructure management, retention, and compliance.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Commvault Systems grew its sales at a weak 6.6% compounded annual growth rate. This fell short of our benchmark for the software sector. 
2. Cash Flow Margin Set to Decline
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Over the next year, analysts predict Commvault Systems’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 24.4% for the last 12 months will decrease to 22.2%.
Final Judgment
Commvault Systems isn’t a terrible business, but it doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 7.3× forward price-to-sales (or $155 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. Let us point you toward CrowdStrike, the most entrenched endpoint security platform.
Stocks We Like More Than Commvault Systems
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market to cap off the year - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,691% between September 2019 and September 2024) as well as under-the-radar businesses like United Rentals (+550% five-year return). Find your next big winner with StockStory today for free.
