eGain Corp: Why Investors Should Check Out This $9.50 Tech Stock

Little-Known Stock Could Provide Big Returns

Over the past few years, software-as-a-service (SaaS) companies have entered the main stage. And that means, in the case of the most well-known SaaS stocks, their share prices have already shot through the roof.

No doubt, the industry has great growth prospects, and even players with share prices that have already skyrocketed may see better days ahead. But today, I’d like to talk about a relatively unknown company in the SaaS sector: eGain Corp (NASDAQ:EGAN).

eGain is an SaaS company that provides customer engagement solutions. Its unified cloud software solution delivers digital transformation for leading brands through virtual assistance, artificial intelligence (AI), knowledge, and analytics. Founded in 1997, the company is a member of the Russell 2000 Index.

With a market capitalization just under $300.0 million, eGain Corp isn’t quite big enough to get much coverage from the mainstream financial media, especially when there are much bigger SaaS companies trading on the stock market.

However, eGain stock did enjoy a strong rally after the market bottomed in March 2020. From a low of $5.05 in March 2020 to a high of $19.77 in mid-October, EGAN stock surged 291%.

As you can see in the following chart, eGain stock wasn’t able to maintain that upward momentum. Its share price plunged after the company’s earnings report was released in November 2020, consolidated for a bit, and then declined again from mid-February 2021 to the end of March.

At the time of this writing, EGAN stock trades around $9.50 apiece, meaning it’s down by more than 50% from its peak last October.

For investors who don’t like to chase hype, now could be the time to consider this SaaS stock.

eGain Corp (NASDAQ:EGAN) Stock Chart

Chart courtesy of StockCharts.com

About eGain Corp

Even though EGAN is not a well-known ticker in the SaaS sector, the company has built a solid customer base.

According to the company’s latest investor presentation, it serves quite a few big-name clients, including Allianz SE (FRA:ALV, OTCMKTS: ALIZF), BT Group (LON:BT.A, OTCMKTS:BTGOF), Comcast Corporation (NASDAQ:CMCSA), CVS Health Corp (NYSE:CVS), the Internal Revenue Service, and the U.S. Department of Veteran Affairs. (Source: “Investor Presentation: Q2 FY2021,” eGain Corp, last accessed April 21, 2021.)

eGain’s business has been growing. Over the company’s past three fiscal years, its SaaS revenue increased at a compound annual growth rate (CAGR) of 33%. Notably, in eGain’s fiscal year 2020, which ended June 30, 2020, the net retention rate of its SaaS customers was 114%.

In the first six months of eGain’s fiscal year 2021, which ended December 31, 2020, the company’s total revenue grew eight percent year-over-year to $38.3 million. (Source: “eGain Reports SaaS Revenue Growth of 21% for First Six Months of Fiscal 2021,” eGain Corp, February 10, 2021.)

As you might expect, the revenue growth was driven by eGain’s SaaS business. In the six-month period, the company’s SaaS revenue increased 21% year-over-year to $32.1 million.

And it wasn’t just sales that were booming. eGain generated adjusted net income of $4.6 million, or $0.14 per diluted share, in the first half of its fiscal 2021. That marked an improvement from the $4.3 million, or $0.13 per diluted share, it earned in the year-ago period.

Last but certainly not least, eGain Corp has been increasing its investments in sales and marketing.

In a note to investors in February, the company’s chief executive officer, Ashu Roy, said, “Our investments in sales and marketing are starting to pay off with the doubling of our sales pipeline, year over year, and we look forward to accelerated SaaS revenue growth in the quarters to come.” (Source: Ibid.)

Analyst Take

At the end of the day, what we’re looking at with eGain Corp is a relatively small SaaS company that’s already profitable and has a growing business.

If the company’s booming sales pipeline can translate to higher growth rates in its financials in the quarters ahead, I wouldn’t be surprised to see investor sentiment turn bullish again on eGain stock.