About ZoomInfo Technologies
Vancouver, Washington-headquartered ZoomInfo Technologies is a company that helps people and organizations make sales.
Connecting one salesperson to the absolute best point of contact in order to notch a sale and acquire a new client, regardless of what one is selling or the business someone is in, is the nothing but the exact essence and dominant use case of ZoomInfo’s platform.
And ZoomInfo’s database is absolutely ginormous, holding the most up-to-date contact information of reportedly 321 million contacts, which, to put this into some context, is nearly the equivalent amount of the entire population of the United States, automatically making itself quite a valuable tool for those in sales and business enterprises in general that are looking to expand and generate more revenues, which is pretty much every company ever last time I checked.
Speaking of some of the companies that reportedly use ZoomInfo’s database and platform, some of its larger clients include the likes of IBM, AT&T, Honeywell, JPMorgan Chase, Deloitte, Accenture, Cisco Systems and boatloads of others looking to expand their respective networks of potential talent and clientele.
Of course, like any forward-looking technology company, ZoomInfo has already been in the process of fully integrating artificial intelligence into its platform, better automating its database with its Copilot and making the previously grueling process of acquiring clients much, much easier and efficient for the end user.
If you’ve been reading my articles for a while now, at this point you probably already put together that ZoomInfo is a software as a service (SaaS) company, charging companies and other organizations a monthly rate for having access to its voluminous database, and the interesting thing about this company’s line of business is that while many SaaS businesses tend to experience a degree of revenue softening during times of economic contraction, given what this company does, it might just have a sort of shield in place, being that as the economy weakens, a platform and database such as ZoomInfo becomes all the more valuable since its clients need to find ways in which they can increase sales or tap into new markets so as to survive during lean times, and where else to turn but towards this company’s podium.
I will see if this really is the case through its more recent annual revenue figures shortly, you bet.
At the end of the day, however, ZoomInfo is actually a pretty neat company in my eyes, one that necessarily and remarkably closes the gap between the known and in the unknown in the world of sales, allowing a sales representative from basically any company or any nook of the world to find and directly contact the best lead(s) and the real decision makers within other organizations in a matter of seconds by virtue of their own company being on ZoomInfo’s subscription plan.
What a resource is what I say now, and what a stock analysis article is what you will be saying later.
ZoomInfo’s stock financials
ZoomInfo Technologies’ stock (NYSE: ZI) is trading at a share price of $12.32 and an associated market capitalization of $4.61 billion, no annually dished out dividend offered to its shareholders and a present price-to-earnings (P/E) ratio of 62.44, even though shares of ZoomInfo are down nearly 75% since its initial public offering (IPO), and according to its P/E ratio it seems as though this company’s valuation is still very rich in relation to what it is actually worth.
Yeah, that was a nuanced and unnecessarily fancy way of saying that the company seems overvalued at the time of this publication.
As I usually aim to do, however, I will better contextualize this price-to-earnings ratio with its growth, mainly in terms of revenues momentarily to get a better understanding of just how overvalued ZoomInfo appears to be, and with respect to the absence of a dividend, both younger and older legacy SaaS companies need to grow and paying out an all too frequent quarterly dividend to its shareholder base can act as a major cash drain and for what I presume to be a growth company such as this one, it is simply not in the firm’s best interest to bleed cash.
I am pro-no dividend for this company, so on this front you will not be hearing any complaints from me.
Regarding the state of the company’s balance sheet, ZoomInfo’s executives are in charge of and responsible for just about $6.8 billion in terms of total assets as well as approximately $4.7 billion in terms of total liabilities, and in the context of being a younger growth company, this is just as good of an overall balance sheet structure as I was hoping for, being in a sort of sweet spot where its total assets are larger enough relative to its liabilities, thus it can continue (prudently) strapping on some more debt financing and growing through organic and non-organic expansion.
Of course, this company’s managers should continue being careful in monitoring its current and future debt levels so as to avoid becoming overleveraged, but if history is any sort of mild indication of ZoomInfo’s future, I have a good deal of confidence in its management of debt and the deployment thereof.
When it comes to the company’s income statement, ZoomInfo’s annual revenues between and throughout 2019 and 2023 have grown at an exemplary rate, growing each and every year from a base of $293 million (2019) and its most recently reported, technical all-time high of $1.2 billion, per the company’s revenue report in 2023, which, while I did expect a degree of year-over-year (YOY) annual revenue growth, this is a markedly great rate of growth over the last five years, especially given the prevailing economic backdrop during this timeframe, telling me that demand has been and continues to be high for ZoomInfo’s database and that the company has been, in most recent history, able to continue penetrating new markets and client bases, and perhaps has picked up some pricing power along the way.
The real question, however, is how much cash this company is burning through in order to obtain this impressive revenue acceleration.
With that, as it stands with the company’s cash flow statement, ZoomInfo’s total cash from operations during the exact same time period have thankfully been both positive and growing, with the company actually, to my surprise, not losing any money from its business operations, which, being founded as recent as 2007, is no small accomplishment, with the company’s total cash from operations coming off of a base of $44 million in 2019 and growing each and every year to its latest reported cash flow figure of $435 million (2023), increasing almost tenfold in a relatively short period of time, making this firm from a cash generation perspective all the more impressive.
ZoomInfo’s stock fundamentals
More on the company’s net profit margin, as it is displayed on Charles Schwab’s platform, ZoomInfo’s net profit margin is pegged at 6.24%, and in comparison with one of its most direct competitors, fellow publicly traded business database enterprise Dun & Bradstreet, ZoomInfo’s net profit margin doesn’t appear to be all that bad being that D&B’s is listed on Schwab’s platform as being a relatively minuscule -1.54%, not to also mention that I am just again, similar to its cash flows, pleasantly surprised that this company’s generating a great deal of cash given its industry position and also merely based off of how young it is.
Should you buy ZoomInfo stock?
ZoomInfo is the best sort of growth company.
The primary criteria being that it is indeed growing its revenues at a rapid year-over-year (YOY) rate, but a key differentiator is the fact that it is actually converting a great portion of revenues into cash that it can use to, among other things, reinvest back into its business, continually invest in artificial intelligence and its overall tech stack, use to buyout some smaller, leaner competitors and much more (again, even with all of these cash flow positives, I wouldn’t advise that this company use its excess cash to support any sort of regular dividend for the foreseeable future, as growth has been and should remain its top priority in order to survive first and thrive second).
While the company’s valuation is a bit demanding (specifically referencing its aforementioned price-to-earnings ratio), its revenues and the growth thereof, in my opinion, support such a near-term valuation not to also mention that there are going to be many more opportunities to both become an increasingly efficient company but also a more depended upon company given both the present and future AI landscape, its revenues are growing like hotcakes, its total cash from operations growing handsomely as well and its net profit margin being in stellar shape.
With this company’s shares down a good deal since its IPO, I think there is a higher probability that one would be catching a beaten down winner than a falling knife, therefore, I will be offering this company’s stock (NASDAQ: ZI) a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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