Enterprise marketing software provider for advertisers and agencies, Marin Software Incorporated (MRIN) boasts of customers such as Dell Technologies Inc. (DELL), Square, Inc. (SQ), and International Business Machines Corporation (IBM). According to an 8-K filing on September 21, the company entered into a revenue-sharing agreement with Alphabet Inc.’s (GOOGL) Google LLC to develop its enterprise tech platform and software products.

MRIN’s shares soared to hit their 52-week high of $27.26 on July 6, primarily because of social media hype. However, it has lost 15% over the past three months to close yesterday’s trading session at $9.12. It is currently trading 66.5% below its 52-week high. Its current volume of 5.34 million is significantly lower than its average volume of 16.13 million, implying less liquidity. Moreover, it reported a loss in the second quarter. So, MRIN’s near-term prospects look uncertain.

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

Positive Developments

MRIN announced an integration with Criteo’s Commerce Media Platform on August 19, allowing brands to easily manage and optimize Criteo Marketing Solution and Retail Media campaigns within the MarinOne platform. In addition, in June 2021, MRIN added the ability to manage Instacart Ads to its MarinOne platform, which makes it easier for brands to connect with customers directly at the point of sale.

Mixed Financials

For the second quarter ended June 30, 2021, MRIN’s revenues decreased 16.2% year-over-year to $6.09 million. However, its gross profit increased 8.5% year-over-year to $2.92 million, and its total operating expenses decreased 18% year-over-year to $5.93 million. Again, its loss from operations came in at $3.01 million in the quarter compared to $4.54 million in the year-ago period. While its net loss decreased 28.2% year-over-year to $2.50 million, its loss per share declined 54% year-over-year to $0.23.

Weak Profitability

In terms of trailing-12-month gross profit margin, MRIN’s 47.44% is 3.3% lower than the industry average of 49.04%. Likewise, the stock’s trailing-12-month EBITDA margin and net income margin are negative compared to the industry averages of 14.68% and 6.20%, respectively. Moreover, its trailing-12-month ROCE, ROTC, and ROTA are negative compared to the industry averages of 8.31%, 4.86%, and 3.59%, respectively.

POWR Ratings Reflect Uncertain Near-Term Prospects

MRIN has an overall rating of C which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. MRIN has a C grade for Quality, in sync with its lower-than-industry profitability ratios.

The stock has a C grade for Value, consistent with its trailing-12-month EV/S of 5.25x, higher than the industry average of 4.36x. Moreover, MRIN has an F grade for Stability.

In addition to the POWR Rating grades I’ve just highlighted, we’ve also rated MRIN for Growth, Momentum, and Sentiment. Get all the MRIN ratings here.

MRIN is ranked #97 of 151 stocks in the Software – Application industry.

Bottom Line

Microcap MRIN is a lesser-known company in the software space. Even though its shares soared in July due to social media hype and recently due to the agreement with Google, it reported a loss in the last reported quarter. Moreover, the company expects to report a non-GAAP loss from operations in the third quarter as well. So, it could be wise to wait for itsThe street bottom-line to improve before scooping up its shares.

How Does Marin Software (MRIN) Stack Up Against its Peers?

While MRIN has an overall POWR Rating of C, you might want to consider investing in the following Software-Application stocks with an A (Strong Buy) rating: Open Text Corporation (OTEX), Commvault Systems, Inc. (CVLT), and National Instruments Corporation (NATI).

MRIN shares were trading at $8.59 per share on Friday afternoon, down $0.53 (-5.81%). Year-to-date, MRIN has gained 325.25%, versus a 16.36% 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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