MANH

Investment Memo: MANH

Sector: Technology | Industry: Services-Prepackaged Software

▸ Compounder — Growing revenue, high ROIC, stable/expanding margins

Final Verdict: ▲ STRONG BUY (Conviction Score: 100/100)

Executive Summary

MANH competes in the technology sector — an industry defined by rapid innovation cycles, winner-take-most dynamics, and high R&D intensity. The pace of AI adoption, cloud migration, and enterprise digital transformation continues to reshape competitive moats. Companies that fail to invest in next-generation platforms risk commoditization, while those that lead tend to earn outsized returns on capital.

MANH is currently positioned as a hypergrowth, high-quality institutional-grade asset. At $1.9B in TTM revenue, the company continues to demonstrate exceptional top-line momentum (47.1% CAGR). Profitability is on a clear upward trajectory with significant margin expansion (+9.7pp operating margin).

Quarterly Momentum:

• Revenue is sequentially accelerating — three consecutive quarters of expansion.
• Margin trajectory is mixed across recent quarters.

Composite Scorecard:

Financial Trajectory & Growth

MANH's growth profile remains aggressive and structurally sound:

• Revenue Growth: The company is maintaining a staggering 47.1% CAGR, with TTM revenue reaching $1.9B.

• Margin Expansion: Profitability is on a clear upward trajectory. Operating margins have expanded by 9.7pp to the current level, while Gross Margins improved by 9.7pp. Five-year margin expansion: +6.3pp.

• Cash Flow Powerhouse: The company generated $606M in Free Cash Flow, resulting in a healthy FCF margin of 34.6%. FCF CAGR (5Y): 22.0%.

Earnings Quality & Operational Efficiency

Earnings quality analysis — the discipline of separating sustainable cash-backed profits from accounting-driven earnings — is critical for long-term investment conviction. The "Quality" profile of MANH is one of its strongest pillars:

• Earnings Quality: Rated as Excellent (cash > earnings), with an Operating Cash Flow to Net Income ratio of 177.1%. This indicates that earnings are backed by hard cash rather than accounting maneuvers.

• Value Creation: ROIC stands at 70.2% (Δ+31.0pp), the company remains in a value-creation phase. 5-year average ROIC: 68.1%. vs. sector median: +63.8pp.

• Accounting Integrity (Beneish M-Score): The M-Score of -3.41 indicates a very low risk of earnings manipulation. Notably, the score remains clean despite strong revenue growth — a positive signal that growth is being achieved without aggressive accounting practices.

• Piotroski F-Score: 6/9 — Strong fundamentals.

• R&D Investment: The company invests 13.4% of revenue in R&D, indicating strong innovation focus.

Risk Profile & Balance Sheet

• Solvency: The company is maintaining stable leverage. Debt-to-Equity stands at 0.00x, which is quite conservative

• Liquidity: Current ratio of 1.28x indicates adequate liquidity.

• Bankruptcy Risk: The Altman Z-Score stands at 5.30. The company is in the 'Safe Zone' with minimal distress risk.

• Refinancing Risk: Rated as Low (25/100). Given its financial position, the company is well-shielded from interest rate spikes.

• Fundamental Beta: 1.01 (above-market, P57). Slightly above-market systematic risk suggests the company will amplify broad market moves modestly.

Macro Sensitivity & Regime Fit

Technology companies are growth-duration assets — their macro sensitivity runs primarily through discount rates and corporate capex budgets. Rising rates compress multiples while decelerating corporate spending reduces billings growth. MANH exhibits a moderate sensitivity profile:

No macro sensitivity data available for this ticker.

Capital Allocation & Governance

• Shareholder Returns: MANH currently returns 145% of FCF to shareholders via dividends (0%) and buybacks (145%). The company actively returns capital to shareholders, signaling management confidence in cash flow durability and limited high-ROIC reinvestment opportunities. (Stock-Based Compensation: 10.3% of revenue — elevated SBC dilutes per-share economics and overstates reported profitability)

• Share Count: Relatively stable with -1.4% change.

Sector Positioning & Competitive Context

Within the Technology sector (Services-Prepackaged Software), MANH ranks as follows:

• Overall Health Rank: 97th percentile (top quartile — sector leader)
• ROIC vs. Sector Median: +63.8pp — significant capital efficiency advantage over peers
• Gross Margin vs. Sector: -22.2pp — below sector average, suggesting cost or mix disadvantage
• Operating Margin vs. Sector: +17.2pp — operationally superior to sector peers

Competitive Assessment: MANH demonstrates sector-leading fundamentals, suggesting durable competitive advantages — whether through brand, scale, technology, or regulatory positioning — that justify a premium allocation within Technology exposure.

Final Verdict & Investment Action

Synthesis: MANH's high-quality institutional-grade profile within Technology (97th percentile), combined with strong top-line momentum and low-risk positioning, produces a high-conviction opportunity. The composite health score of 70/100 provides broad validation across quality, safety, and durability dimensions.

Verdict: ▲ STRONG BUY

Conviction Score: 100/100

Recommended Action: Core position candidate. Size above benchmark. The data consistently supports conviction.

Conviction Drivers: Positive: +Safety, +Revenue, +Margins, +ROIC, +EarningsQuality, +FFQuality, +ZScore, +LowLeverage, +SectorLeader | Negative: -CashBurn, -Dilution (anchored to Health: 70/100)

Key Strengths

• Strong revenue growth (47.1% CAGR)
• Expanding operating margins (+9.7pp)
• High return on capital (70.2% ROIC)
• Excellent earnings quality (cash > earnings)
• Strong balance sheet (safe Z-score)
• Strong composite health (70/100)

Key Risks

• Elevated cash burn risk (100/100)

Investment Thesis

MANH is a hypergrowth, high-quality institutional-grade, low-risk Services-Prepackaged Software company. The company demonstrates healthy revenue growth (47.1% CAGR) with improving profitability — the hallmark of a well-managed franchise. Strong capital efficiency (ROIC: 70.2%) suggests durable competitive advantages that protect against new entrants. The composite health score of 70/100 confirms broad fundamental strength. The company ranks in the top quartile of its sector (97th percentile), supporting relative conviction. In technology, product cycle timing and TAM expansion define the asymmetry of outcomes — on balance, the evidence tilts bullish — strengths materially outweigh risks.

This investment memo for MANH (Technology — Services-Prepackaged Software) was generated using quantitative analysis of 20 quarterly SEC filings spanning 2021-03 to 2025-12. Models applied: Beneish M-Score, Piotroski F-Score, Altman Z-Score, Fama-French factor analysis, composite health scoring (v2.1), macro regime sensitivity, insider activity analysis, and labor efficiency metrics. Latest filing: 2025-12-31. All data sourced from SEC EDGAR XBRL filings.