Greenway showed a net profit in its fiscal year through June 30, but slipped to a $406,000 net loss in its most recent quarter. Guidewire is the only consistently profitable company of the four recent cloud IPOs, reporting a $8.3 million profit last year before taxes and $7.9 million profit in its most recent quarter.
All of which explains why Guidewire is the best performing stock of the four cloud companies to go public in recent weeks. Its success seemed to pave the way for cloud IPOs that were significantly smaller in revenue and that had yet to post a profit. But somehow they have all managed to receive warm welcomes in a IPO market that is not always kind to red ink.
It may be chalked up to cloud mania. Or it may be Wall Street priming its IPO for more web-based offerings ahead of the mammoth Facebook deal. It's very much in the interest of Facebook -- and its investment banks -- to see web IPOs perform well after they debut. But recent history shows that many web offerings that start strong out of the gate languish after a few months.
That may be the case with these cloud IPOs as well, except perhaps for Guidewire. For companies that are losing money and burning through cash, they are priced richly: Greenway is trading at 4.5 times its historical revenue, Brightcove is trading at 6.1 times, and Bazaarvoice at an expensive 14.6 times revenue. If investors were to put the kind of critical scrutiny to these stocks that analysts and reporters are applying to Facebook's financials, they might not be faring so well.
