TipRanks Smart Growth Portfolio #3: Automating Alpha
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Dear Investors,
Welcome to the 3rd edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News and Updates
❖ Cathie Wood’s ARK Investment continues to increase its GitLab (GTLB) holdings. Over the past week, ARK Next Generation Internet ETF (ARKW) and ARK Innovation Fund (ARKK) have made several purchases of the stock for an estimated amount of $12.43 million. These purchases increase total ARK Investment holdings of GTLB to about $93.7 million, or approximately 1.34% of GitLab’s public float.
❖ DA Davidson upgraded monday.com (MNDY) to “Buy” from “Hold” with a $350 price target. The firm’s analysts cited several key factors for the rating upgrade. MNDY has consistently outperformed expectations since 2022, with continued outperformance anticipated in 2025. In addition, analysts expressed confidence in the durability of monday.com’s future cash flows, bolstered by robust demand for its AI enterprise-service management product. Recent results indicate a positive trend in enterprise adoption of MNDY’s services, further supporting the upgrade. Overall, DA Davidson views the recent pullback in monday.com’s stock as “an opportune time to take a second look at an attractive entry point.”
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This Week’s Top Growth Pick: Clearwater Analytics (CWAN)
Clearwater Analytics is a fintech SaaS company providing cloud-based investment accounting, reporting, and analytics solutions for asset managers, insurers, and large enterprises. Its platform automates data aggregation, portfolio management, and regulatory compliance, delivering real-time insights and operational efficiency. By leveraging AI-driven analytics and seamless cloud integration, Clearwater enhances transparency and decision-making for financial institutions. Its scalable architecture supports global clients with multi-asset class reporting and risk analysis, eliminating manual processes and improving accuracy. Focused on innovation and automation, Clearwater streamlines investment operations, empowering firms to optimize performance and compliance. With a commitment to data integrity and financial intelligence, it is redefining investment reporting in an increasingly complex financial landscape.
Source: Clearwater Analytics company website
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Investing in the Future
Founded in 2004, Clearwater Analytics set out to transform investment management through innovative data solutions. Over the years, the company has expanded strategically, leveraging technological advancements, acquisitions, and product enhancements to cement its position in the financial technology sector.
Over the past three years, CWAN has aggressively grown its market presence, capitalizing on the rising demand for automated investment accounting and data-driven decision-making. In late 2022, it acquired French startup JUMP Technology, a move that significantly strengthened its front and middle-office capabilities. This acquisition broadened its appeal to asset managers across Europe and marked a major step in its global expansion.
The momentum continued into 2023 with the launch of Clearwater-GPT, the world’s first generative AI technology for investment management, designed to deliver AI-created content for sales, service, marketing, IT, and client interactions while helping financial institutions analyze investment data and respond to market changes while maintaining security and compliance.
In 2025, Clearwater made its most significant strategic moves yet. In January, it announced a $1.5 billion acquisition of Enfusion, a provider of portfolio management and risk systems for investment funds. The deal expands Clearwater’s footprint in the hedge fund space and enhances its suite of solutions.
Just two months later, CWAN revealed the acquisitions of Beacon and Bistro, two platforms that will bolster its presence in private markets. Beacon, used by financial giants like PIMCO and Blackstone, specializes in cross-asset class modeling and risk analytics for private and alternative assets. Meanwhile, Bistro, Blackstone’s proprietary portfolio visualization software, was designed specifically for the firm’s Credit & Insurance business.
By integrating these technologies with its Enfusion-enhanced offerings, Clearwater is creating a unified, front-to-back platform that spans investment execution, accounting, risk management, compliance, regulatory reporting, and analytics across all asset classes.
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The Clearwater Edge
Clearwater Analytics operates a cloud-native SaaS platform that provides a comprehensive view of investment portfolios while automating investment accounting, performance measurement, compliance, and risk reporting. At its core, Clearwater Analytics platform delivers real-time data aggregation, seamless integration, and scalable processing capabilities. By consolidating data from custodians, brokers, and fund administrators, the platform eliminates manual intervention and streamlines decision-making.
Within this ecosystem, Clearwater PRISM enhances investment data management and client reporting, providing institutional investors with access to a centralized, dynamic financial insights platform. Clearwater JUMP extends support across front, middle, and back-office operations, while the Income Forecast tool enables investment professionals to automate and integrate income forecasting within a single system.
Source: Clearwater Analytics Investor Presentation February 2025
The integration of cutting-edge technologies, particularly automation and AI-driven insights, reinforces CWAN’s competitive edge. The launch of Clearwater-GPT introduced Gen AI, enabling clients to generate investment scenarios, predict market trends, and uncover complex patterns beyond human detection. This innovation improves risk assessment, forecasting accuracy, and operational efficiency. Simultaneously, Clearwater’s partnership with Snowflake enhances its platform by leveraging Snowflake’s AI Data Cloud, providing advanced AI tools and natural language query capabilities for more intuitive data interactions.
Source: Clearwater Analytics Investor Presentation February 2025
These advantages have made Clearwater the preferred choice for leading financial institutions. Arch Capital, Erste Asset Management, M&G Investments, Franklin Templeton, APA, and many others, rely on Clearwater for investment data management, while corporate giants such as Cisco, Dell, PepGen, and Urban Outfitters, among others, integrate its platform for accounting and investment oversight. Public institutions, including the State of Florida and Midwestern University, also leverage Clearwater’s solutions.
Strategic collaborations further expand Clearwater’s market reach. Netherlands-based Aegon Asset Management, managing over $338 billion in assets, implemented Clearwater PRISM to optimize global client reporting. J.P. Morgan Asset Management, with $2.67 trillion in AUM, integrated Clearwater’s platform with Morgan Money trading system, enhancing multi-asset investment execution.
Through continuous technological innovation and high-impact partnerships, Clearwater Analytics empowers its clients with cutting-edge tools and insights, reinforcing its leadership in investment management solutions.
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Scaling with Strength
Clearwater benefits from a subscription-based revenue model, with SaaS-based fees from asset managers, insurers, corporations, and public entities forming the bulk of its business. In 2024, the platform processed $8.8 trillion in assets daily, up from $7.3 trillion in 2023, reinforcing its expanding market presence.
CWAN’s Total Addressable Market (TAM) continues to grow, particularly with its expansion into hedge funds and private markets following the Enfusion acquisition. Global demand for investment analytics and automation is projected to grow at a 10-12% CAGR, positioning Clearwater for further scalability.
The company has consistently delivered strong financial performance, fueled by recurring revenue and increasing market penetration. In 2024, CWAN generated $451.8 million in revenue, marking a 22.7% YoY increase. The fourth quarter alone contributed $126.5 million, up 27.7% from Q4 2023. Annualized Recurring Revenue (ARR) grew 25.3% year-over-year, reaching $474.9 million, while the net revenue retention rate hit 116%, reflecting robust client expansion and upselling capabilities.
Net income surged to $427.6 million in 2024, compared to a $23.1 million net loss in 2023, primarily due to a one-time $472 million deferred tax asset benefit. Excluding this, profitability remains strong, with Adjusted EBITDA reaching $145.7 million, up 39% YoY, and an expanded EBITDA margin of 32.2%, reflecting improved operating leverage.
Clearwater’s three-year revenue CAGR stands at 21.5%, while adjusted EPS has soared over 230%. Having achieved non-GAAP profitability years ago, the company has consistently reported double- or triple-digit adjusted EPS growth every quarter since Q4 2021. This sustained operational momentum suggests GAAP profitability is on the horizon.
Financially, Clearwater remains solid, with $285.8 million in cash, cash equivalents, and investments, against total debt of $45.9 million. Free cash flow for 2024 stood at $69.1 million, despite a one-time $79 million settlement related to its Tax Receivable Agreement in Q4. With an estimated runway exceeding four years, Clearwater has the flexibility to sustain operations and invest in growth without immediate external funding.
Looking ahead, CWAN expects 2025 revenue of $535.5-$542 million, reflecting 19-20% growth, with Adjusted EBITDA projected at $182-$185 million. The company reiterated its long-term outlook with expectations of 20% revenue growth, 80% gross margins, and 40% adjusted EBITDA margins, even with slight near-term revenue growth dilution from the Enfusion acquisition.
Source: Clearwater Analytics Investor Presentation February 2025
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The Smart Money Bet
Clearwater’s stock has gained nearly 55% over the past year, despite pulling back about 18% since reaching an all-time high in November 2024. Each of the past four quarterly earnings reports was met with strong investor enthusiasm, driving post-earnings share gains. Given this history, the recent decline appears to be driven by profit-taking and broader market volatility, rather than any fundamental weakness.
This pullback has improved CWAN’s valuation, with several metrics moving below their long-term averages. Its P/S and non-GAAP P/E ratios currently sit at the midpoint of its peer valuation range, despite stronger growth and profitability metrics than most comparable fintech firms and the best share performance among its peers over the past year. Moreover, when analyzing future cash flows, Clearwater’s stock appears undervalued by approximately 20%, a rare occurrence among high-growth companies.
Given this setup, it’s no surprise that Wall Street sentiment remains overwhelmingly bullish. According to TipRanks’ top-rated analysts, CWAN is a “Strong Buy,” with an average 12-month price target implying nearly 40% upside. Notably, two of five top-rated analysts have raised their price targets in the past month, reinforcing confidence in Clearwater’s continued momentum.
DA Davidson analysts specifically cited the Beacon and Bistro acquisitions, along with the pending Enfusion buyout, as key drivers of their recent upgrade. They believe these moves will “produce the only fully modern, integrated, and scaled provider of front-to-back office automation capabilities for global investment managers, spanning public, private, and alternative assets.”
With its industry-leading growth, expanding market share, and continued analyst support, Clearwater remains well-positioned to outperform, making the recent pullback a compelling entry point for long-term investors.
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To Sum It All Up
Clearwater Analytics is a fintech SaaS company streamlining investment accounting, reporting, and analytics for institutional clients. Through cloud-native automation and AI-driven insights, it delivers scalable, real-time financial solutions, setting itself apart in a competitive landscape. Strategic acquisitions have expanded its capabilities, positioning it as the only fully integrated front-to-back provider for investment firms. While recent stock movements reflect broader market volatility, Clearwater remains fundamentally strong, with robust revenue growth, improving margins, and increasing institutional adoption. Analysts remain bullish, citing its expanding market share and continued product innovation. With a disciplined approach to growth and a long-term vision, Clearwater is well-positioned to solidify its leadership in investment technology while capitalizing on rising demand for automation in financial services.
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Smart Growth Portfolio
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
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