Five9, Inc. (FIVN) and its subsidiaries provide cloud software for contact centers in the United States and internationally. FIVN serves customers in various industries comprising banking and financial services, business process outsourcers, consumer, healthcare, technology, and education.

On October 10, 2022, FIVN announced that Rowan Trollope resigned from the company’s CEO position and the Board of Directors. Mike Burkland, FIVN’s Chairman, is expected to return as the company’s CEO. “The timing of the departure is not ideal as it follows the recent termination of the head of EMEA,” MoffettNathonson analyst Sterling Auty said.

On October 10, 2022, Morgan Stanley lowered FIVN from an “overweight” rating to “equal weight.” Earlier, Piper Sandler lowered their price target on FIVN from $166.00 to $150.00.

FIVN has lost 28.2% over the past month to close the last trading session at $58.70. It has lost 57.3% year-to-date and 61.9% over the past year.

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

Weak Bottom Line

FIVN’s revenue came in at $189.38 million for the second quarter that ended June 30, 2022, up 31.7% year-over-year. However, its loss from operations came in at $21.76 million, up 53.3% year-over-year.

Moreover, its net loss came in at $23.67 million, up 43.2% year-over-year, while its loss per share came in at $0.34, up 36% year-over-year.

Stretched Valuations

FIVN’s forward EV/Sales of 5.21x is 115.5% higher than the industry average of 2.42x. Its forward EV/EBITDA of 29.48x is 159.7% higher than the industry average of 11.35x.

Moreover, its forward Price/Sales of 5.25x is 118.9% higher than the industry average of 2.40x, while its forward Price/Book of 13.75x is 268.4% higher than the industrial average of 3.73x.

Negative Profitability Margins

FIVN’s trailing-12-month EBITDA and net income margins of negative 4.00% and 11.70% are lower than the industry averages of 12.18% and 3.91%, respectively.

Furthermore, its trailing-12-month ROCE, ROTC, and ROTA of negative 40.20%, 4.37%, and 6.96%, compared with the industry averages of 6.45%, 3.80%, and 2.31%, respectively.

POWR Ratings Reflect Bleak Prospects

FIVN has an overall rating of D, equating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

FIVN has a D grade for Momentum. The stock is trading below its 50-day moving average of $88.85 and its 200-day moving average of $102.86.

It has a C grade for Stability, in sync with its 24-month beta of 1.25.

In the 147-stock Software – Application industry, FIVN is ranked #94. The industry is rated F.

Click here for the additional POWR Ratings for FIVN (Growth, Value, Sentiment, and Quality).

View all the top stocks in the Software – Application industry here.

Bottom Line

FIVN’s bottom line has been deteriorating. Moreover, the stock’s stretched valuations, and negative profitability margins are concerning. And with its CEO stepping down, I think FIVN might be best avoided now.

How Does Five9, Inc. (FIVN) Stack Up Against its Peers?

While FIVN has an overall POWR Rating of D, one might consider looking at its industry peers, Commvault Systems, Inc. (CVLT), which has an overall A (Strong Buy) rating, and Yalla Group Limited (YALA), Progress Software Corporation (PRGS), and Open Text Corporation (OTEX), which have an overall B (Buy) rating.

FIVN shares were trading at $58.86 per share on Tuesday afternoon, up $0.16 (+0.27%). Year-to-date, FIVN has declined -57.14%, versus a -21.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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