Headed into Thursday's post-close release of its first-quarter results, investors appeared afraid to own AppFolio (APPF 3.45%). As it turns out, however, that fear wasn't merited. The company handily topped its revenue and earnings estimates, sending the stock more than 11% higher on Friday. Indeed, at one point, shares were up to the tune of 19%. Even with the intraday pullback, AppFolio logged an impressive post-earnings gain.
The gain raises a question though: Is this stock actually a buy, particularly after Friday's heroic move?
AppFolio is well out of the red, moving deeper into the black
During the three-month stretch ending in March, real estate technology company AppFolio turned $187.4 million worth of revenue into per-share operating income of $1.05. Sales were up 38% year over year, while the bottom line unwound the year-ago quarterly per-share loss of one cent. Both numbers rolled in above analysts' expectations for a top line of $178.7 million and a profit of $0.89 per share.
But the big driver behind today's gains is more likely to be the company's guidance for the remainder of 2024. AppFolio -- which helps landlords more effectively manage their properties and their tenants -- anticipates full-year revenue of somewhere between $766 million and $774 million versus the current consensus of $766 million and last year's top line of $620 million. Operating-income margins as well as free-cash-flow margins are expected to continue improving as well.
This rapid sales and earnings growth isn't entirely surprising. The company's been generating (and growing) revenue for several years now. Income has been hit-and-miss, however, and has only become more hit than miss within the past few quarters now that AppFolio is operating at enough scale to cover all of its costs. To this end, this year's expected revenue growth of 23.5% should dramatically pump last year's per-share earnings of $1.71 up to $3.84, en route to next year's projected profit of $5.09 per share on the heels of another 20% improvement in sales.
Not now but soon
But is the stock a buy?
As always, it depends. For most investors, it won't be. AppFolio is still very much a start-up. Its growth rates may be impressive, but they're also somewhat unpredictable. That makes it tough to determine a stock's value or predict where that stock might go in the foreseeable future.
If you're able to stomach this sort of risk, however, AppFolio may be a fit for your portfolio. You still might want to hold off a while before taking that plunge though. Friday's big gain could prove tough to hold onto. The stock's due for some profit taking -- enough to make waiting worth your while.
