Why AppFolio Stock Hits All-Time High Today

Property Management Technology Company appfolio (APPF 27.00%) It reported fourth quarter 2023 financial results after the market closed on Thursday. Investors clearly liked what they saw. Shares soared Friday morning, and as of 1 PM ET, AppFolio shares were up more than 29% and hit an all-time high.

The company is growing profitably

In the fourth quarter, AppFolio’s revenue increased 39% year-over-year to $172 million. This was the fastest quarterly growth rate in nearly a decade and ahead of what management had suggested. This growth was achieved in part due to a 13% increase in software-managed rental units.

CEO Shane Trigg said AppFolio had prioritized profitable growth in 2023, and this showed in its financial results. The operating profit margin in the fourth quarter was 16.4% compared to the operating loss in the same period last year. Moreover, free cash flow margin expanded to nearly 20% compared to a 1% margin in the same quarter last year.

The guidance wasn’t bad either.

Management expects AppFolio to generate between $755 million and $765 million in revenue in 2024, which would be growth of 22% to 23%. This is a step back compared to the 31% growth in 2023. But it’s still a decent growth rate.

On an adjusted basis, AppFolio also expects to further improve profitability. Management’s guidance is to expand adjusted operating margin from 12.2% in 2023 to at least 21% in 2024. And we expect adjusted free cash flow margins to expand from approximately 12% in 2023 to at least 17% in 2024.

AppFolio stock, which currently has a market cap of about $8 billion, is trading at an expensive valuation relative to its 2024 guidance. This is worth considering. However, it is undeniable that the company is generating better growth and profits, so the market’s enthusiasm is understandable.