A Sunny Outlook for This WFH Stock…

Wednesday: The Independent Investor FROM THE DESK OF MILES EVERSON: A lot of businesses around the world were supposed to reopen after experiencing the negative impacts of the COVID-19 pandemic. However, due to the Delta variant,once again disease is shaking up the globe, and many of these reopenings had to be postponed. But did you know that one particular stock has a sunny outlook in light of the work from home setup? Since a lot of workers are working remotely nowadays, this company is seeing a boost in its earnings. You might want to check this out as an independent investor! Read on for more insights about how the pandemic is changing the workforce and how you can make smart investment decisions even in the midst of this health crisis. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

A Sunny Outlook for This WFH Stock… As the coronavirus pandemic ebbed and flowed, we observed something interesting about our workforce. Younger analysts are pushing for a full return to the office. Recent college graduates yearn for the elbow-to-elbow team hustle and in-person mentorship. The New York Times' article "Return to Office Hits a Snag: Young Resisters" highlights the generation gap in employee sentiment surrounding remote work. However, it shows the overall trend going the other way. For most companies, older workers are the ones urging a return to the office. According to a survey by The Conference Board, 64% of Baby Boomers hope to see a full-fledged return, compared with only 55% of Generation X and only 45% of millennials. There is no doubt that the work-from-home trend can lead to longer hours and heavier workloads because of the reduced separation between work and life. But for younger workers, the pros of remote work are clear: You can wake up later because there's no commute. You can build your dream office setup. You don't need to buy lunch. You can get a quick workout in between tasks without anyone noticing. You can listen to loud music. You can take video calls in sweatpants. While some leaders are frustrated about this, the New York Times article highlights the “new normal.” As companies recruit talent, they must be mindful of the work-from-home precedent that the pandemic has established. The world of software engineering has been particularly forward-thinking about remote work… Many programmers will tell you that the pandemic was a productivity godsend, thrilled to never go back into an office. But replacing a bustling and collaborative office space with virtual tools isn't an easy task. Some might think Zoom (ZM) is enough, but most programmers will tell you they need more than just a virtual scrum. ―they need powerful collaboration and workflow management tools to eliminate the isolating effect of working from home, as well as whiteboarding tools for collaborative brainstorming and other tools to access systems that might be stuck on-premises. Workflow management becomes particularly important when an engineer's boss can't just walk up to that employee out of the blue and ask how things are going. Everyone needs to be "in the know" constantly about their workflows and how their team is progressing. Managers need ways to plan and track pipelines. That's where platforms like Jira, built by Atlassian (TEAM), and its derivatives come in handy. Jira is a set of giant, constantly updating workflow charts built specifically for software engineering teams with agility in mind. "Agile" is a term adopted by many software companies that refers to a specific way of thinking about project management. It has been proven time and time again to be a great way for teams to build great products with minimal waste. Select engineering teams used Jira and its stablemate collaboration tools like Confluence and BitBucket even before the pandemic. But if you looked at Atlassian's Uniform return on assets ("ROA"), the real metric of profitability, you'd see that these amazing products didn't make the company much cash. Looking at the company's Uniform ROA below, you can see that economic returns have been falling since it began trading on the Nasdaq in 2015. It had a particularly tough fiscal year 2020, with a dismal negative 41% Uniform ROA: While Atlassian's product suite was a value-add for the teams that used it, many smaller teams chose to do things the quick and dirty way, opting for simpler and cheaper workflow management software―or none at all. But as people scattered in the four cardinal directions, even those smaller teams needed high-quality tools to keep up with their work. Jira went from being a nice-to-have to a need-to-have. Analysts recognize that the tide has changed for Atlassian… Embedded Expectations Analysis, which turns the traditional discounted cash flow ("DCF") valuation model on its head, shows that Atlassian's current valuation is pricing the company to blow by the analyst expectations and soar to more than 150% ROA by 2025. The market expects Atlassian to do great things now that the average software development office might look more like a bedroom or a dining table than a corporate office. Investors are left to ask a crucial question… Do they believe that the market expectations are reasonable? This is crucial because investors who bet on companies with unrealistic embedded expectations can often get burned when those expectations don't materialize. That’s why you have to be wise about how you should spend your money on the stock market. You can attain that by researching a company’s overall financial performance or checking out some market analyses offered by highly credible firms. The more you keep yourself abreast with what’s happening in the stock market, the more you’ll be able to make good investment decisions. This will lead to less or no regrets in the future and higher returns on your investments. Hope you’ve found this week’s insights interesting and helpful. Follow us on LinkedIn. Stay tuned for next Wednesday’s The Independent Investor! Health care costs make no sense… Learn more about how one insurance giant is staying ahead of the game on next week’s The Independent Investor!