$FROG- JFrog Stock Analysis:
$FROG - JFrog Corp. is a “Liquid Software”, which essentially means that it is “version-less”, meaning that it always stays up to date due to incremental improvements. JFrog's platform acts as a bridge between software development and deployment, enabling organizations to build/release software faster and more securely. JFrog has many different types of products that they offer to their customers, both at an enterprise and customer level.
JFrog provides DevOps platforms which power supply chain software, which is becoming increasingly important. Additionally, the volume/importance of software is expanding rapidly, which presents JFrog with another opportunity for extreme growth. As of December 31st, 2021, JFrog has over 6,650 organizations that have adopted their platform.
JFrog built the first ever universal software package repository (JFrog Artifactory), which they believe can/will transform the software cycle using their package-based approach.
Software packages are combinations of binary files that can be released/deployed to environments where they can be executed (run). JFrog's Artifactory platform manages and deploys all types of software packages, which makes them “software storage system” for their clients.
The volume of these software packages has increased exponentially over the past decade. These packages need to be managed and stored and require a new approach to storage. JFrog provides a systematic and automatic approach to the management/storage of these packages.
Furthermore, JFrog's “liquid software” allows for constant micro updates, which eliminate the need for “versions”. By eliminating software versions JFrogs Artifactory is always current/updated, and it allows for software releases to be continuous.
Lastly, JFrog is designed to be indifferent to the programming languages and development technologies, so that any customer can integrate their software seamlessly. This helps JFrog appeal to the widest amount of potential clients as possible.
JFrog's Pipeline is a continuous delivery tool that is responsible for automating the movement of software packages in their Artifactory. JFrog's Pipeline also provides visibility and control over the software release cycle, providing coordination.
JFrog's X-Ray scans Artifactory to secure all of the software packages stored in it. JFrog's X-Ray breaks down the packages, uncovering potential vulnerabilities, policy violation, and compliance issues. This allows organizations to control and trust their software release cycles and packages.
JFrog's Distribution uses proprietary technology to distribute packages to multiple locations and update the packages as needed. JFrog's distribution offers support for major package technologies, allowing for seamless software releases.
JFrog Mission Control:
Mission control is a “control panel” that provides a high-level view of an organization's software supply chain workflow.
JFrog's insight is a universal DevOps tool that provides customers with powerful analytical capabilities. JFrog's insight processes and collects key metrics to provide insights to managers, teams, and officers within an organization.
JFrog's Connect allows companies to manage software updates and monitor their performance(s). JFrog's Connect is a by-product of their acquisition of Upswift in 2021.
Benefits derived from JFrog Products:
In July 2021, JFrog acquired a 100% interest in Vdo, which is a product security platform for automating software security tasks. This acquisition expanded JFrogs product offering and provides JFrog with a chance for future growth.
One month later (August), JFrog acquired Upswift, who provides their device management platform.
This sectioned is designed to give you (the reader) insight into the background of the highest (executive) managers/officers at Asbury. The following people are listed as the highest-ranking members of the JFrog Management Team.
Shlomi Ben Haim (Co-Founder & Chief Executive Officer): Mr. Ben Haim has been JFrog's Chief Executive Officer since April 2008 and their Chairman of their board since January 2020.
From June 2006 to June 2009, he was the CEO of AlphaCSP a company implementing software applications before they got acquired in 2009. Prior to 2006, Mr. Haim was as an executive director.
Yoav Landman (Co-Founder & Chief Technology Officer): Mr. Landman has served as a member of JFrog's board of directors and as Chief Technology Officer since April 2008.
From January 2002 to December 2008, he was also with AlphaCSP, where he served as a Senior Consultant and as a member of management. Mr. Landman is also the creator of JFrog Artifactory. Mr. Landman holds a Masters of Computing from The Royal Melbourne Institute of Technology, Australia
Orit Goren (COO): Orit has plenty of experience in the high-tech industry, having served as VP of HR for Pontis, SolarEdge, Voltaireas, and HR roles at Intel.
Jacob Shulman (CFO): Mr. Shulman has served as JFrog's Chief Financial Officer since May 2018. Prior to this, he was with Mellanox Technologies, (supplier of computer networking products) most recently as Chief Financial Officer from 2012 to 2018, VP of Finance from March 2012 until November 2012 and Corporate Controller from 2007 to 2012.
As you can see, JFrog's highest level management officers all have prior experience in top management positions. This leads me to believe that they are well-suited to be “at the helm” of JFrog.
In order to undergo the comparable analysis, we need to get an idea of their closest competitors. These competitors must operate in the same space, operate in similar geographies, be of similar market cap, and have valid financial ratios. Using this criterion, I came up with the following.
Comparable Analyses: (Spreadsheet found at the end of this analysis)
By comparing JFrog's financial ratios to that of their publicly listed competition (listed above in the “competitors” section) I found the following:
Based off of JFrog's PEG Ratio in comparison to their competitors, $FROG stock should be valued at $209/share, which would imply a share price increase of 737% which is obscene, so I disregarded it.
JFrog's P/S ratio (compared to their counterparts) indicates that the FROG stock should have a fair value of $47.37/share, which would imply an upside of 90% in order to reach their fair value.
JFrog's EV/Revenue ratio indicates that their fair value is $44.35/share, which would translate into a potential upside of 78%.
Due to the large variability between comparable analyses, I decided to take average the 2 comparable results that were reasonable. By doing this I arrived at a final comparable valuation of $45.86, which implies an upside potential of 84 %
DCF: (Visualization found at the end of this analysis)
By inputting the necessary data into my DCF model, I arrived at a fair valuation of $FROG stock of $39.47/share, which implies an upside of 58%
In order to provide simplicity, I wanted to come to one final, all-encompassing valuation for the $FROG stock. I did this through taking the average valuation of the Average Comparable, and the DCF model. By doing this I arrived at a price target for the $FROG stock of $42.66/share, which implies an upside of 71%.
My plan for an investment in the $FROG stock would go as follows: