HashiCorp, Inc. (HCP) provides multi-cloud infrastructure automation solutions worldwide. The company made its stock market debut on December 9, 2021, going public via the traditional initial public offering method and raising $1.22 billion in gross proceeds. It added 323 new customers during the fourth quarter, including 60 customers with equal to or greater than $100K in ARR, now totaling 655, up 31% year-over-year.

The company also expects total revenues and non-GAAP loss per share for the first quarter of 2022 to be between $92 – $96 million and $0.30 – $0.28, respectively. The stock has lost 51.7% over the past month and 63.1% year-to-date to close Friday’s trading session at $33.56. In addition, it is currently trading 67.4% below its all-time high of $102.95, which it hit on December 27, 2021. So, HCP’s near-term prospects look bleak.

Here’s what could influence HCP’s performance in the upcoming months:

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the fiscal fourth quarter ended January 31, 2022, HCP’s revenue surged 56% year-over-year to $96.50 million. The company’s non-GAAP gross profit increased 65.7% year-over-year to $83.70 million.

Click here to check out our Cloud Computing Industry Report for 2022

However, its non-GAAP operating loss for the quarter increased 465.5% year-over-year to $31.10 million. In comparison, its non-GAAP net loss came in at $31.50 million, representing a 505.8% year-over-year increase. Its non-GAAP loss per share came in at $0.24, up 200% year-over-year.

Unfavorable Analyst Estimates

Analysts expect HCP’s EPS to decrease 18.7% in the current year and 7.1% next year. Also, its EPS is expected to remain negative in the current quarter, next quarter, current year, and next year.

Low Profitability

In terms of trailing-12-month CAPEX/Sales, HCP’s 0.07% is 97.1% lower than the industry average of 2.27%. Likewise, its trailing-12-month asset turnover ratio of 0.31% is 51.5% lower than the industry average of 0.64%. Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the industry averages of 7.49%, 4.95%, and 3.68%, respectively.

Stretched Valuation

In terms of forward P/S, HCP’s 14.56x is 373.9% higher than the industry average of 3.07x. Likewise, its forward EV/S of 11.37x is 268.7% higher than the industry average of 3.08x. Furthermore, the stock’s forward P/B of 5.98x is 41.3% higher than the industry average of 4.24x.

POWR Ratings Reflect Bleak Prospects

HCP has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. HCP has a D grade for Value, in sync with its higher-than-industry valuation ratios.

The stock has a D grade for Growth and Sentiment. This is justified as analysts expect its EPS to remain negative in the near term,

HCP is ranked #43 out of 58 stocks in the D-rated Software – Business industry. Click here to access HCP’s ratings for Stability, Momentum, and Quality.

Bottom Line

HCP is currently trading way below its 50-day and 200-day moving averages of $62.30 and $67.58, respectively, indicating a downtrend. As the stock looks overvalued at the current price level, it is best to avoid it now.

How Does HashiCorp (HCP) Stack Up Against its Peers?

While HCP has an overall POWR Rating of D, you might want to consider investing in the following Software – Business stocks with an A (Strong Buy) or B (Buy) rating: F5 Networks, Inc. (FFIV), VMware Inc. (VMW), and Agilysys, Inc. (AGYS).

HCP shares fell $0.05 (-0.15%) in after-hours trading Monday. Year-to-date, HCP has declined -64.36%, versus a -12.20% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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