Investment Thesis
nCino demonstrates strong cash generation ($82.6M FCF) and healthy gross margins (60.6%), but is fundamentally unprofitable with net income declining 46.6% YoY despite 10% revenue growth. The massive gap between 60.6% gross margin and 0.6% operating margin indicates severe operating expense control issues, while minimal profitability (0.9% net margin) and tight liquidity (1.0x current ratio) leave no margin for error.
Strengths
- Strong free cash flow generation of $82.6M (13.9% FCF margin) indicating cash-generative business model
- Healthy gross profit margin of 60.6% demonstrates underlying product quality and pricing power typical of software
- No debt burden with $88.4M cash on hand provides financial flexibility and reduces bankruptcy risk
Risks
- Net income collapsed 46.6% YoY despite 10% revenue growth, signaling severe negative operating leverage and expense control failure
- Massive profitability gap: 60.6% gross margin but only 0.6% operating margin indicates bloated operating expenses consuming virtually all gross profit
- Abysmal capital efficiency with ROE of 0.5% and ROA of 0.3% demonstrate shareholder value destruction
- Tight liquidity at 1.0x current ratio with only $5.2M net income leaves minimal cushion for operational disruptions
- Unexplained $76.4M annual disconnect between free cash flow and net income raises sustainability and accounting quality concerns
Key Metrics to Watch
- Operating margin trajectory and operating expense ratio as percentage of revenue
- Net income trend - critical indicator of whether profitability decline is temporary or structural
- Free cash flow to net income ratio - monitor if gap persists or narrows
Financial Metrics
Revenue
594.8M
Net Income
5.2M
EPS (Diluted)
$0.05
Free Cash Flow
82.6M
Total Assets
1.6B
Cash
88.4M
Profitability Ratios
Gross Margin
60.6%
Operating Margin
0.6%
Net Margin
0.9%
ROE
0.5%
ROA
0.3%
FCF Margin
13.9%
Balance Sheet & Liquidity
Current Ratio
1.00x
Quick Ratio
1.00x
Debt/Equity
0.00x
Debt/Assets
35.2%
Interest Coverage
2.52x
Long-term Debt
N/A
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-13T02:42:25.753069 |
Data as of: 2026-01-31 |
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