Burlington, Mass.-based digital engagement company Bridgeline Digital, Inc. (BLIN) serves more than 2,500 clients across more than 100 countries. The company’s customers include Caterpillar Inc. (CAT), AstraZeneca PLC (AZN), and CVS Health Corporation (CVS). On July 2, 2021, BLIN announced that it had received more than $2.50 million in cash due to warrant exercises, bringing its cash balance to approximately $6 million. Investors’ optimism surrounding this news may have helped the stock soar to its 52-week price high of $14.38 on July 6, 2021.

However, the stock has lost 21.8% in price over the past month and 51.4% over the past three months to close yesterday’s trading session at $2.66. It is currently hovering near its 52-week low of $2.17, which it hit on May 11, 2021. 

BLIN faces intense competition from other players in the crowded digital space. Furthermore, its losses widened significantly in the third quarter. So, BLIN’s near-term prospects look bleak.

Click here to check out our Software Industry Report for 2021

Here are the factors that could shape BLIN’s performance in the upcoming months:

Positive Developments Not Enough to Drive Growth

On November 24, BLIN announced that a leading sales intelligence company had chosen its DataBravo product to support its lead augmentation software. Also, BLIN launched a new Hawksearch Connector for BigCommerce B2B Edition this month, which is now available in the BigCommerce marketplace.

In addition, BLIN announced on July 19 that a top distributor of education supplies in Germany had selected its site search software to ease customers’ journeys through their extensive catalog. However, the company’s shares have been declining consistently since hitting their 52-week high on July 6, 2021, indicating investor pessimism.

Top Line Growth Doesn’t Translate into Bottom Line Improvement

BLIN’s top line surged 30.9% year-over-year to $3.45 million for its fiscal third quarter, ended June 30, 2021, driven by strong license sales. However, the company’s non-GAAP net loss increased 88.5% year-over-year to $2.71 million. Its non-GAAP loss per share came in at $0.46, up 24.3% year-over-year. Also, its adjusted EBITDA declined 29.4% year-over-year to $302,000.

Low Profitability

In terms of trailing-12-month EBIT margin, BLIN’s 3.84% is 58.5% lower than the 9.27% industry average. The stock’s trailing-12-month net income margin is negative, versus the 6.33% industry average. Furthermore, its negative trailing-12-month ROCE and ROTA compare to the 8.20% and 3.57% respective industry averages.

POWR Ratings Reflect Bleak Prospects

BLIN has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. BLIN has a D grade for Quality, consistent with its lower-than-industry profitability ratios.

The stock has a D grade for Growth. This is in sync with analysts’ expectation that its EPS will decrease 52.5% this year and remain negative this year and next year.

BLIN has a D grade for Stability, consistent with its 2.92 beta.

BLIN is ranked #45 of 59 stocks in the Software – Business industry. Also, click here to see the additional POWR Ratings for BLIN (Value, Momentum, and Sentiment).

Click here to check out our Software Industry Report for 2021

Bottom Line

Lesser-known nano-cap company BLIN has made several positive developments over the past few months. In addition, it acquired WooRank and HawkSearch this year. However, the stock is currently trading below its 50-day and 200-day moving averages of $3.63 and $3.75, respectively, indicating a downtrend. And  its EPS is expected to decline this year. So, we think the stock is best avoided now.

How Does Bridgeline Digital (BLIN) Stack Up Against its Peers?

While BLIN has an overall POWR Rating of D, one might want to consider taking a look at its A-rated (Strong Buy) industry peers, such as CSG Systems International, Inc. (CSGS), SS&C Technologies Holdings, Inc. (SSNC), and F5, Inc. (FFIV).

BLIN shares were unchanged in premarket trading Wednesday. Year-to-date, BLIN has gained 3.10%, versus a 23.04% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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