2 Simple Reasons to Ditch Demandware After Its Quarterly Loss

NEW YORK (TheStreet) -- Demandware , a leading provider of enterprise cloud commerce solutions, reported a fourth-quarter loss of $3.8 million, or 11 cents per share, Thursday. Not only did that miss Wall Street estimates, it raises concerns about the stock's valuation, reminding investors that the easy money on this stock has already been made. Investors who bought into Demandware in the year after its initial public offering in 2012 have done well. But not everyone's happy. DWRE data by YCharts Since the shares peaked at $82.23, investors have seen 34% of their value evaporate. But even after that retreat, there's nothing about Demandware today that screams value. The stock is still trading at 318 times forward earnings estimates of 17 cents per share. And Thursday's earnings miss serves as a reminder for why investors should abandon this stock. On an adjusted basis, when excluding stock option expenses and non-recurring costs, the Burlington, Mass.-based company's earnings were 13 cents per share, a penny short of estimates. Revenue was better, however. For the quarter that ended in December, Demandware posted revenue of $52.5 million, beating Street forecasts of $48.7 million by almost 8%. For the year, the company reported a wider loss of $27.1 million, or 78 cents per share. Revenue was reported as $160.6 million. The key takeaway, though, is that earnings and revenue are not like to improve in the near term, for two reasons. First, the company is taking on much larger rivals like IBM and Oracle -- businesses that have much deeper pockets. To compete, Demandware will need to keep spending heavily to grow its top line. Second, the cloud/big data market -- which includes leaders Salesforce.com , Workday and ServiceNow -- is becoming saturated. And that situation is only likely to get worse in 2015. Demandware stock closed Wednesday at $54.13, down 1.38%. The shares have lost 6% year-to-date, trailing both the Dow Jones Industrial Average and S&P 500 , which have gained 1% and 2% respectively. All told, Demandware, which has been a public company for less than three years, is still experiencing the growing pains common to young businesses. Since it reported a profit in the year-ago quarter, its shares are down almost 30%. After this quarter's loss, investors would be wise to look instead for safer investments that pay solid dividends. Follow @Richard_WSPB // 0;if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs"); // ]]> Must Read: 5 Stocks Warren Buffett Is Selling

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