UiPath (PATH) has been one of the most searched stocks on Zacks.com recently, so it may be a good idea to look at a few facts that could drive the stock's performance in the near term.
Over the past month, shares of this enterprise automation software developer have risen +0.4% compared to a +1.5% gain for the Zacks S&P 500 Composite Index. During that same period, the Zacks Technology Services industry, which UiPath belongs to, has fallen 3%. The key question here is what the future holds for this stock?
While media reports or rumors of major changes in a company's business prospects usually influence the movement of that company's share price, leading to immediate price movements, there are always certain fundamental factors that ultimately drive a buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company's future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
It essentially looks at how sell-side analysts covering the stock are revising their earnings forecasts to reflect the impact of the latest business trends. As a company's earnings forecasts rise, so does the fair value of its stock. If the fair value is higher than the current market price, investors will be interested in buying the stock, driving the share price up. This is why empirical studies have shown a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, UiPath is expected to post earnings of $0.03 per share, representing a decline of 66.7% from the year-ago period. The Zacks Consensus Estimate has remained unchanged within the past 30 days.
The consensus revenue estimate for the current fiscal year is $0.38, indicating a change of -29.6% year over year. This estimate has not changed in the past 30 days.
Looking at the next fiscal year, the consensus revenue estimate is $0.42, which represents a +11.8% change from what UiPath was expected to report a year ago, with estimates unchanged over the past month.
The Zacks Rank, our proprietary stock rating tool that has an impressive outside-audited track record, effectively harnesses the power of earnings estimate revisions and is a more reliable indicator of near-term stock price movements. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, has earned UiPath a Zacks Rank #3 (Hold).
The story continues
The chart below shows the evolution of the company's consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
Revenue growth is arguably the best indicator of a company's financial health, but if a company can't grow its revenue, then nothing happens. After all, it's nearly impossible for a company to grow its revenue over the long term without growing its revenue. Therefore, it's important to know a company's revenue growth potential.
For UiPath, the consensus revenue estimate for the current quarter is $302.92 million, indicating a change of +5.4% year-over-year. Estimates for the current and next fiscal years are $1.41 billion and $1.57 billion, indicating changes of +7.6% and +11.7%, respectively.
Last reported results and surprise history
UiPath reported revenue of $335.11 million in the most recent quarter, up 15.7% from the same period last year. EPS was $0.13 for the same period, up from $0.11 in the prior-year period.
Compared to the Zacks Consensus Estimate of $332.84 million, reported revenues represented a surprise of +0.68%. EPS surprise was +18.18%.
The company has beaten consensus EPS estimates in each of the last four quarters, and revenue also beat consensus estimates in each quarter during that period.
evaluation
No investment decision can be efficient without taking into account stock valuation. To predict the future price movement of a stock, it is important to determine whether the current price properly reflects the intrinsic value of the underlying business and the company's growth prospects.
Comparing the current value of a company's valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of how reasonably priced its stock is.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation criteria to rate stocks from A to F (with An being better than B, B being better than C, etc.), which can be very helpful in identifying whether stocks are overvalued, fairly valued or temporarily undervalued.
UiPath is rated a D on this scale, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding UiPath is worth following, although its Zacks Rank #3 suggests it may be capable of performing in line with the broader market in the near term.
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