3 Big Reasons FRSH Should Be On Your Watchlist
Over the last six months, Freshworks's shares have sunk to $15.55, producing a disappointing 7.6% loss while the S&P 500 was flat. This might have investors contemplating their next move.
Given the weaker price action, is this a buying opportunity for FRSH? Find out in our full research report, it's free.
Founded in Chennai, India in 2010 with the idea of creating a 'fresh' helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Freshworks's ARR punched in at $785.9 million in Q1, and over the last four quarters, its year-on-year growth averaged 19.9%. This performance was impressive and shows that customers are willing to take multi-year bets on the company's technology. Its growth also makes Freshworks a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue.
Software is eating the world. It's one of our favorite business models because once you develop the product, it usually doesn't cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.
Freshworks's gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an elite 84.4% gross margin over the last year. Said differently, roughly $84.39 was left to spend on selling, marketing, and R&D for every $100 in revenue.
While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.
Over the last year, Freshworks's expanding sales gave it operating leverage as its margin rose by 9.2 percentage points. Although its operating margin for the trailing 12 months was negative 15.5%, we're confident it can one day reach sustainable profitability.
There are definitely things to like about Freshworks. After the recent drawdown, the stock trades at 5.6× forward price-to-sales (or $15.55 per share). Is now the time to initiate a position? See for yourself in our full research report, it's free.
The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNN
10 minutes ago
- CNN
Senate passes first-of-its-kind cryptocurrency legislation
The Senate passed first-of-its-kind bipartisan cryptocurrency legislation, called the GENIUS Act, after months of negotiations and weeks of back-and-forth between Democratic and Republican backers. The final tally was 68-30, with 18 Democrats voting yes, and two Republicans voting no. The bill now moves to the House for consideration. House Majority Whip Tom Emmer has called for the chamber's Financial Services Committee to advance stablecoin legislation by the end of July. The GENIUS Act aims to regulate stablecoin, a specific type of cryptocurrency that is tied to the US dollar. Despite bipartisan senators working on this bill for months, and general agreement across the Capitol that stablecoin regulation is necessary, the legislation has become a flashpoint for Democratic concerns with President Donald Trump's own cryptocurrency dealings. Sen. Elizabeth Warren, the top Democrat on the Senate Banking Committee, has consistently warned that the bill does not place sufficient guardrails on stablecoin, and alleged that the GENIUS Act would 'supercharge' corruption. Democratic Sen. Chris Murphy of Connecticut has agreed that the bill needs stricter ethics guidelines, telling CNN's Dana Bash previously, 'If Congress passes a bill in the next few weeks that exempts the president of the United States from the ethics requirements around the issuance of cryptocurrency, then, yes, we will have no one to blame but ourselves for this, at least this, specific kind of corruption.' However, GOP Sen. Bill Hagerty, one of the lead co-sponsors of the bill, has insisted that 'this legislation is agnostic as to company, it's agnostic as to person.' 'This is simply about putting the United States of America on the best digital payments path that it possibly could be on,' the Tennessee Republican told reporters at the Capitol in May. 'This is about a payments currency, and it's about consumer protection, and it's about dollar dominance and Treasury dominance – that's all it's about. And there are a lot of superfluous questions going around but I think we've done a good job of answering those.' The Senate originally failed to advance the package after Democrats withheld their support due to concerns over Trump's cryptocurrency deals. Further bipartisan negotiations resulted in a new amendment draft that garnered enough support among Democrats to move the package forward.
Yahoo
11 minutes ago
- Yahoo
Why First Solar Stock Dived by Almost 18% Today
The U.S. solar industry's tax credits might end up melting away sooner than expected. A Senate committee has proposed this for the current budget bill. 10 stocks we like better than First Solar › Many parts of the U.S. were sunny on Tuesday, but that happy situation didn't extend metaphorically to solar energy stocks. Quite a few took major hits that trading session on the latest developments in the legislative sphere. One of the industry's victims was First Solar (NASDAQ: FSLR), which went dim with a nearly 18% decline in its share price. That decline was far steeper than the 0.8% slip of the S&P 500 index that day. President Trump's One, Big, Beautiful Bill remains a massive bone of contention in Congress, and has been the subject of much criticism and debate among lawmakers. It's also undergoing change as Senators adjust it in an effort at compromise. On Tuesday, the Senate Finance Committee proposed speeding up the elimination of tax credits for solar and wind energy. Under current law, these do not expire until 2032; under the new proposal, they would be reduced by 60% next year and phased out entirely in 2028. This contrasts with the bill's stance on tax credits for other forms of energy, specifically nuclear, hydroelectric, and geothermal. In its current form, the proposed law would actually extend these credits to 2036. Although there is likely far more horse trading to come before the Senate finally settles on a form of the bill it can accept, renewable energy will almost certainly remain a target. Investors are right to be concerned about the effect on solar and other types of green energy companies, although this feels like an over-reaction -- the better companies in this segment should be able to adjust to the demise of tax credits. Before you buy stock in First Solar, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and First Solar wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $660,821!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $886,880!* Now, it's worth noting Stock Advisor's total average return is 791% — a market-crushing outperformance compared to 174% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends First Solar. The Motley Fool has a disclosure policy. Why First Solar Stock Dived by Almost 18% Today was originally published by The Motley Fool
Yahoo
11 minutes ago
- Yahoo
Indexes end lower as Israel-Iran fighting raises investor anxiety
STORY: U.S. stocks closed lower on Tuesday, with the Dow dropping seven-tenths of a percent, the S&P 500 losing more than eight-tenths and the Nasdaq shedding nine-tenths of a percent. The Israel-Iran conflict raged on for a fifth day, with the U.S. military moving fighter jets to the Middle East and President Donald Trump calling for Iran's "unconditional surrender." Besides the conflict, investors are closely watching for any new information on Trump's tariffs, his tax-cut bill and U.S. interest rates. The Federal Reserve is expected to leave rates unchanged at the conclusion of its two-day policy meeting on Wednesday, despite ongoing pressure from Trump to lower them. Robert Conzo is CEO of The Wealth Alliance. 'I think [Fed Chairman] Jerome Powell wants to be independent from Trump. He wants to show I'm not going to be strong-armed by the government. I'm going to hold this until we're ready to drop it down. I'm not really sure why the Fed doesn't do a signalling cut of 25 basis points just to show that they're willing to do it. The rest of the world is cutting. We're in great shape. I'm not sure why he doesn't do that, but he's not. And there's no indication that in this particular round he's going to [cut rates].' Stocks on the move included solar companies which fell after Senate Republicans late Monday unveiled proposed changes to Trump's tax-cut bill, including a phase-out of solar, wind and energy tax credits by 2028. Enphase Energy tumbled 24% and Sunrun plunged 40%. Also, Eli Lilly shares dipped 2% after the company agreed to acquire Verve Therapeutics for up to $1.3 billion. Shares of Verve surged more than 80%. And shares of JetBlue fell almost 8% after its CEO told employees the airline will wind down underperforming routes and reassess the size and scope of its leadership team. The carrier also said it was unlikely it would break even this year, according to an internal memo seen by Reuters. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
