Dropbox is positioning itself as a company to consider. It is achieving very high growth on a continuous basis, thanks to the trend towards digitalisation in medium-sized companies and the need for immediate access to all files.
In the following post we will analyse the financial variables behind the business idea and what strengths and weaknesses we find in this company.
In the following tables we have summarised the most relevant Dropbox data through our analysis in company valuation.
We can see that sales have grown significantly, continuing a fairly strong growth, although somewhat lower than in 2017. However, the increase has been above average for companies in the sector.
This growth is reflected in an increase of 26% in the number of subscribers over the last year, a highly recurrent revenue pattern that partly "guarantees" revenues for the coming periods.
As can be seen in the ROE is quite negativeThis is due to the growth that the company has enjoyed, by increasing the size of the workforce and infrastructure to prepare for future growth.
It is worth mentioning that the company is directly funding this growth with capital increases without relying on financial debt for the time being, which is the main reason why the company decided to go public.
The growth on the assets side is mainly reflected in the financial investments account, which is made up of the more than 29 investments Dropbox has done inorganically in recent years to accelerate its growth.
With all this we can see that Dropbox is still far from achieving a certain economic stability and being able to self-finance its operations. However, this is understandable given the company's growth, and it is very likely that in the short term the company will start to take on debt in order to be able to maintain this growth without having to resort to future capital increases.
Dropbox has suffered some stock market corrections since its IPO, in part due to a decline in the growth of 5% compared to the previous year and to the a marked increase in losses and cash requirements generated by the company's recurring operations during 2018.
However, these corrections, which have lost almost 25% of the value of the initial shares, have come at a rather negative juncture, with fears of a new tech bubble, political tension in the US and the prospect of a possible recession in the global economy in the short term..
In other words, although Dropbox's financial statements show problems with regard to its ability to generate funds, a capital structure that is quite different from its peers and a rather small increase in efficiency, the company's share price has been punished by a somewhat pessimistic economic situation and by the poor results of some of the last few years of the company. company purchases have reported during 2018.
If Dropbox wants to have a bullish rally during 2019, it is going to have to prove that it is able to reduce net cash requirements. It should also borrowing to improve capital structure of the company and focus on its core business to increase the number of subscribers and building loyalty, as the end-of-year quotation will largely depend on the capacity of this increase.