Alight, Inc. (ALIT) is a leading cloud services provider of integrated human capital and business solutions. The company operates in three segments: Employer Solutions; Professional Services; and Hosted Business. It is a subsidiary of the alternative investment management company The Blackstone Group, Inc. (BX).

ALIT went public through a reverse merger with institutional investor Bill Foley-backed blank check company Foley Trasimene Acquisition Corp. on July 6, 2021. However, the stock declined 27.7% since then to close Friday’s trading session at $7.53. Also, the stock fell 30.7% year-to-date due to the extended market correction and bleak growth prospects.

Here’s what could shape ALIT’s performance in the near term:

Bleak Financials

ALIT’s revenues increased 5.2% year-over-year to $725 million in the fiscal first quarter ended March 31, 2022. Gross profit improved marginally from the same period last year to $223 million.

However, the company’s operating expenses increased 30.8% from the prior-year quarter to $225 million. Consequently, operating losses amounted to $2 million, compared to $46 million in earnings reported in the fiscal 2021 first quarter. EBT loss came in at $12 million. Net loss stood at $12 million, translating to a $0.02 loss per share.

Mixed Growth Prospects

Analysts expect ALIT’s revenues to increase 7.1% year-over-year to $719.88 million in the fiscal second quarter (ending June) and 8% year-over-year to$745.48 million in the fiscal third quarter (ending September). However, analysts expect the company’s EPS to decline 25% from the same period last year to $0.14 in the next quarter.

Furthermore, Street expects ALIT’s revenues to rise 6.5% year-over-year in fiscal 2022 and 7.7% year-over-year in fiscal 2023. However, the annual consensus estimate of $0.58 for the ongoing year indicates a 19.8% decline from the same period last year.

Mixed Valuation

In terms of non-GAAP forward P/E, ALIT is currently trading at 12.98x, 18.9% lower than the industry average of 16.02. Its forward Price/Sales and Price/Book multiples of 1.13 and 0.76 compare with industry averages of 1.27 and 2.48.

However, the stock’s trailing-12-month Price/Cash Flow ratio of 46.23 is 184.3% higher than the industry average of 16.26. In addition, its forward EV/EBIT multiple of 59.15 is 316.4% higher than the industry average of 14.20. Furthermore, ALIT’s forward EV/Sales ratio of 2.26 is 39.9% higher than the industry average of 1.62.

POWR Ratings Reflect Uncertainty

ALIT has an overall rating of C, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

ALIT has a grade of C for Value and a D for Momentum. The stock’s mixed valuation is in sync with the Value grade. In addition, ALIT is currently trading below its 50-day and 200-day moving averages of $8.54 and $10.08, indicating a downtrend and justifying the Momentum grade.

Of the 156 stocks in the D-rated Software – Application industry, ALIT is ranked #86.

Beyond what I’ve stated above, view ALIT ratings for Growth, Sentiment, Stability, and Quality here.

Bottom Line

Tech stocks have been the worst performers amid the ongoing market correction. In fact, the ongoing tech rout has caused ALIT to wipe off its initial gains after listing last year. As the Fed maintains its aggressive hawkish policies, tech stocks are expected to remain under pressure in the near term. Thus, investors should wait until the tech markets stabilize before investing in ALIT.                                                    

How Does Alight (ALIT) Stack Up Against its Peers?

While ALIT has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Commvault Systems, Inc. (CVLT), Rimini Street Inc. (RMNI), and Enghouse Systems Limited (EGHSF), which have an A (Strong Buy) rating.

ALIT shares were trading at $7.02 per share on Monday afternoon, down $0.51 (-6.77%). Year-to-date, ALIT has declined -35.06%, versus a -19.87% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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