What Makes Vertex (VERX) a Prospective Investment?

Brown Capital Management, an investment management company, released its “The Brown Capital Management Small Company Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. The Small Company Fund returned 8.48% in the quarter, roughly in line with the Russell 2000 Growth index’s 8.41% return. The Fund has only gained 1.80% year to date, far behind the benchmark’s return of 13.22%, despite this quarter representing a minor move toward a fundamentally driven market. In addition, check the fund’s top five holdings to know its best picks in 2024.

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The Brown Capital Management Small Company Fund highlighted stocks like Vertex, Inc. (NASDAQ:VERX), in the third quarter 2024 investor letter. Vertex, Inc. (NASDAQ:VERX) offers enterprise tax technology solutions for retail trade, wholesale trade, and manufacturing industries. The one-month return of Vertex, Inc. (NASDAQ:VERX) was -0.45%, and its shares gained 98.92% of their value over the last 52 weeks. On December 19, 2024, Vertex, Inc. (NASDAQ:VERX) stock closed at $53.59 per share with a market capitalization of $8.358 billion.

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The Brown Capital Management Small Company Fund stated the following regarding Vertex, Inc. (NASDAQ:VERX) in its Q3 2024 investor letter:

“Vertex, Inc. (NASDAQ:VERX) is an enterprise-software company that sells indirect tax determination and compliance software to enterprises and mid-sized companies. Indirect taxes are taxes imposed on goods, services or transactions rather than on individuals or businesses. For example, the sales tax levied on a grocery bill is a form of indirect tax. It is collected by the supermarket company at the time of a transaction and then remitted to the government on behalf of the customer. Indirect taxes are quite complex in the U.S., varying by city, county and state, making them cumbersome to track and manage. Vertex’s software provides real-time determination of the taxes to be collected at the time of the transaction, saving time, money and headaches for its customers. We believe Vertex is an EGC that provides mission-critical and sticky software with a leading market position in the enterprise market. Vertex addresses a large market whose growth is being driven by the growing complexities of indirect tax regulations globally. Vertex counts more than 60% of Fortune 500 companies among its customers, and we see meaningful room for expansion within this marquee customer base. The company has delivered mid-teens revenue growth over the last three years, and we believe it can grow at this level for the next three to five years. We expect Vertex to be a profitable company on a GAAP basis over the next 12 months, with further room for margin expansion.”

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