Clearwater Analytics Holdings (CWAN) AI Stock Analysis

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Clearwater Analytics Holdings

(NYSE:CWAN)

Rating:78Outperform

Price Target:

$26.00

▲(17.59%Upside)

Clearwater Analytics Holdings is positioned strongly in its industry due to robust financial health and strategic acquisitions that promise growth. While technical indicators show mixed signals, the company's valuation is reasonable, and the earnings call reflected a positive outlook. Strategic corporate events further enhance growth potential, making it a promising investment despite some minor operational challenges.

Positive Factors

Cost Management

Previously announced $20mm of cost synergies are effectively already executed on, and the company expects terminal margins between Enfusion and Clearwater to be broadly the same at maturity.

Financial Performance

Investment analysts have upgraded Clearwater to Overweight, indicating confidence in future performance.

Revenue Growth

The company expects to grow +21% organically for the full-year, which is in-line with expectations.

Negative Factors

Stock Value Decline

CWAN has experienced an 18% decline in stock value year-to-date, reflecting concerns about execution risks in large-scale mergers and acquisitions.

Clearwater Analytics Holdings (CWAN) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$6.26B

Dividend YieldN/A

Average Volume (3M)3.27M

Price to Earnings (P/E)13.3

Beta (1Y)0.81

Revenue Growth23.21%

EPS GrowthN/A

CountryUS

Employees1,915

SectorTechnology

Sector Strength79

IndustrySoftware - Application

Share Statistics

EPS (TTM)0.13

Shares Outstanding254,586,550

10 Day Avg. Volume4,338,663

30 Day Avg. Volume3,270,296

Financial Highlights & Ratios

PEG Ratio0.00

Price to Book (P/B)-29.83

Price to Sales (P/S)0.00

P/FCF Ratio-25.65

Enterprise Value/Market Cap0.99

Enterprise Value/Revenue3.54

Enterprise Value/Gross Profit17.89

Enterprise Value/Ebitda77.98

Forecast

1Y Price Target

$31.90

Price Target Upside44.28% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering11

Clearwater Analytics Holdings Business Overview & Revenue Model

Company DescriptionClearwater Analytics Holdings, Inc. develops and provides a Software-as-a-Service solution for automated investment data aggregation, reconciliation, accounting, and reporting services to insurers, investment managers, corporations, institutional investors, and government entities. The company offers investment accounting and reporting, performance measurement, compliance monitoring, and risk analytics solutions. Its Clearwater Prism solution enables self-service access to data feeds from accounting, compliance, performance, and risk systems, including those offered by the company and other third-party software vendors, as well as provides flexible reporting to various users. The company was incorporated in 2021 and is headquartered in Boise, Idaho.

How the Company Makes MoneyClearwater Analytics generates revenue primarily through subscription fees for its cloud-based software solutions. Clients pay recurring fees to access the platform's investment accounting and reporting services, which are tailored to meet the specific needs of different industries. The company's revenue model is bolstered by long-term contracts that provide a stable and predictable income stream. Additionally, Clearwater Analytics may engage in partnerships with financial institutions to expand its market reach and enhance its service offerings, although specific partnership details are not disclosed.

Clearwater Analytics Holdings Earnings Call Summary

Earnings Call Date:Apr 30, 2025

(Q1-2025)

% Change Since: -2.77%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong financial performance, strategic acquisitions, and technological advancements. While there were some challenges, such as a slight decline in NRR and Enfusion's slower growth, the outlook remains positive with plans for continued integration and expansion.

Q1-2025 Updates

Positive Updates

Strong Revenue Growth

Revenue for Q1 2025 was $126.9 million, marking a 23.5% year-over-year increase.

Significant ARR Increase

Annualized Recurring Revenue (ARR) reached $493.9 million, up 22.7% from the prior year.

EBITDA Expansion

Adjusted EBITDA for Q1 2025 was $45.1 million, a 40% year-over-year increase, with a margin of 35.5%.

Gross Margin Improvement

Gross margin improved to 78.9%, close to the long-term target of 80%.

Successful Strategic Acquisitions

Acquisitions of Enfusion, Beacon, and Bistro are expected to add over 50% in revenue, despite a 15% share dilution.

Global Market Expansion

Secured a pivotal win with a leading German insurance company, opening up significant market opportunities in Europe.

Innovation in Technology

Development of a proprietary reconciliation tool, Helios, and leadership in generative AI applications.

Successful Integration Plans

Finance and legal teams have been integrated under common leadership, aiming for cross-sell strategies and operational synergies.

Negative Updates

NRR Slight Decline

Net Revenue Retention (NRR) rate decreased slightly from 116% to 114% due to less AUM growth.

High Equity-Based Compensation Costs

Equity-based compensation and related payroll taxes were $27.6 million, representing 21.7% of Q1 revenue.

Challenges with Enfusion's Growth Rate

Enfusion's Q1 2025 revenue growth was 13%, lower than Clearwater's 20% target, with plans to accelerate growth in two years.

Company Guidance

In the first quarter of 2025, Clearwater Analytics demonstrated robust financial performance with a revenue of $126.9 million, marking a 23.5% increase year-on-year. The company's annualized recurring revenue (ARR) reached $493.9 million, growing by 22.7% from the previous year. The adjusted EBITDA stood at $45.1 million, accounting for 35.5% of the revenue and showing a 40% increase year-on-year. Gross margin was reported at 78.9%, indicating a significant improvement towards the long-term target of 80%. Additionally, the company achieved a gross revenue retention rate of 98% and a net revenue retention rate of 114%. Clearwater also outlined its strategic acquisitions, including Enfusion, Beacon, and Bistro, which are expected to contribute to a consolidated revenue growth of 59% to 61% for the full year 2025. The acquisition of these companies is projected to enhance Clearwater's offerings, integrating front, middle, and back-office operations, and is expected to drive a 20% growth rate and a 50 basis point improvement in gross margin annually. The company remains confident in its ability to execute its strategic roadmap, emphasizing continued investment in R&D and operational excellence.

Clearwater Analytics Holdings Financial Statement Overview

Summary

Clearwater Analytics Holdings exhibits robust financial health with strong revenue growth, high profitability margins, and a stable balance sheet characterized by low leverage. The company's effective cash flow management further supports its growth trajectory, although certain income and cash flow components suggest the need for cautious interpretation.

Income Statement

Very Positive

Clearwater Analytics Holdings has demonstrated strong revenue growth with a significant increase from $451.8M to $475.9M in the TTM, translating to a 5.3% growth rate. The company achieved impressive gross and net profit margins at 72.9% and 90.1%, respectively, indicating robust profitability. The EBIT and EBITDA margins also show improvement, reflecting effective cost management and operational efficiency. However, the substantial net income can be attributed to other income or tax benefits, which warrants cautious optimism.

Balance Sheet

Positive

The balance sheet displays a solid equity base, with a debt-to-equity ratio of 0.06, indicating low financial leverage and reduced financial risk. The equity ratio of 86.8% also suggests a strong capital structure. However, the return on equity (ROE) calculation is skewed due to the high net income figure, potentially inflating the perceived returns. Overall, the balance sheet showcases financial stability with ample liquidity and low debt levels.

Cash Flow

Very Positive

Clearwater Analytics Holdings has demonstrated strong cash flow management, with a free cash flow of $83.5M in the TTM, representing a substantial increase from the previous period. The company maintains a healthy operating cash flow to net income ratio, indicating efficient cash conversion. The free cash flow to net income ratio is positive, supporting sustainable growth and financial flexibility. Nevertheless, fluctuations in investing and financing cash flows suggest potential volatility in future cash positions.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
475.95M	451.80M	368.17M	303.43M	252.02M	203.22M
	Gross Profit
347.21M	328.82M	261.04M	215.64M	184.16M	149.96M
	EBIT
20.36M	12.23M	-16.75M	5.12M	38.76M	-20.42M
	EBITDA
25.87M	24.41M	-6.82M	5.12M	31.95M	-18.15M
	Net Income Common Stockholders
428.99M	424.38M	-21.63M	-6.70M	-8.09M	-44.23M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
282.85M	255.49M	296.22M	255.61M	254.60M	61.09M
	Total Assets
1.29B	1.17B	558.74M	483.84M	344.36M	115.56M
	Total Debt
69.55M	71.92M	72.08M	76.60M	53.91M	424.90M
	Net Debt
-205.61M	-105.43M	-149.69M	-174.13M	-200.69M	363.82M
	Total Liabilities
142.72M	139.34M	149.09M	145.45M	82.27M	460.17M
	Stockholders Equity
1.12B	1.01B	354.33M	269.52M	197.03M	-344.61M
Cash Flow		Free Cash Flow
83.50M	69.06M	78.98M	50.25M	-1.67M	-10.29M
	Operating Cash Flow
88.78M	74.32M	84.60M	58.01M	3.36M	-6.49M
	Investing Cash Flow
55.68M	-55.65M	-95.06M	-76.55M	-5.03M	-3.81M
	Financing Cash Flow
-58.77M	-61.67M	-19.29M	16.23M	195.29M	51.04M

Clearwater Analytics Holdings Technical Analysis

Technical Analysis Sentiment

Negative

Last Price22.11

Price Trends

50DMA

23.08

Negative

100DMA

25.64

Negative

200DMA

26.49

Negative

Market Momentum

MACD

-0.07

Positive

RSI

40.55

Neutral

STOCH

17.47

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CWAN, the sentiment is Negative. The current price of 22.11 is below the 20-day moving average (MA) of 23.04, below the 50-day MA of 23.08, and below the 200-day MA of 26.49, indicating a bearish trend. The MACD of -0.07 indicates Positive momentum. The RSI at 40.55 is Neutral, neither overbought nor oversold. The STOCH value of 17.47 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CWAN.

Clearwater Analytics Holdings Risk Analysis

Clearwater Analytics Holdings disclosed 56 risk factors in its most recent earnings report. Clearwater Analytics Holdings reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Clearwater Analytics Holdings Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PEGA	80 Outperform	$8.46B	48.06	39.29%	0.12%	14.29%	151.38%
CWAN	78 Outperform	$6.26B	13.28	58.14%	―	23.21%	―
CVLT	75 Outperform	$8.15B	109.43	25.23%	―	18.63%	-55.09%
VERX	65 Neutral	$5.85B	235.54	-19.65%	―	15.20%	-666.94%
Sector *	62 Neutral	$11.80B	10.10	-7.47%	2.99%	7.37%	-8.16%
GTLB	61 Neutral	$6.82B	413.54	2.53%	―	29.31%	―
KC	51 Neutral	$3.58B	―	-33.09%	―	13.85%	3.47%

* Technology Sector Average

Performance Comparison

CWAN

Clearwater Analytics Holdings

22.11

3.07

16.12%

CVLT

CommVault Systems

184.62

66.32

56.06%

PEGA

Pegasystems

98.84

42.04

74.01%

Kingsoft Cloud Holdings

12.43

9.61

340.78%

VERX

Vertex

36.92

1.62

4.59%

GTLB

Gitlab

41.23

-2.20

-5.07%

Clearwater Analytics Holdings Corporate Events

M&A TransactionsBusiness Operations and Strategy

Clearwater Analytics Completes Acquisition of Enfusion

Positive

Apr 21, 2025

On April 21, 2025, Clearwater Analytics completed its acquisition of Enfusion, valued at approximately $1.5 billion. This strategic move positions Clearwater as the first unified, cloud-native front-to-back platform for institutional investors, enhancing its market position by integrating Enfusion’s front-office capabilities with its existing middle and back-office solutions. The acquisition is expected to expand Clearwater’s total addressable market and international presence, offering seamless integration and operational efficiency across asset classes and geographies.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.