UiPath Inc. (PATH) provides a range of robotic process automation (RPA) solutions through an end-to-end automation platform. The company serves banking, healthcare, financial services, and government entities.

The company recently reported a restructuring involving significant layoffs. PATH’s Board of Directors included an additional approximately 6% reduction of its global workforce of approximately 4,025 as of October 31, 2022. The company now expects total restructuring expenses of approximately $30 million, up from the $15 million estimate provided earlier.

The stock has declined 76.2% over the past year and 71% year-to-date to close its last trading session at $12.50. While PATH has gained 7.9% over the past month, it is still trading lower than its 50-day moving average of $12.60 and its 200-day moving average of $19.72.

Here are the factors that could influence PATH’s performance in the near term:

Bleak Bottom Line

For the fiscal second quarter ended July 31, PATH’s total revenue increased 23.9% year-over-year to $242.22 million. However, its non-GAAP net income declined 372.6% from the prior-year quarter to negative $11.41 million. Its non-GAAP net income per share decreased 300% year-over-year to negative $0.02.

Stretched Valuation

In terms of its forward EV/Sales, PATH is trading at 5.12x, 95% higher than the industry average of 2.63x. The stock’s forward EV/EBITDA multiple of 369.16 is significantly higher than the industry average of 12.43.

In terms of forward Price/Sales, it is trading at 6.78x, 170.9% higher than the industry average of 2.50x. Its forward Price/Cash Flow multiple of 1,331.20 is considerably higher than the industry average of 17.85.

Poor Profitability

PATH’s trailing-12-month EBITDA margin and net income margin of negative 39.05% and negative 42.98% compare to their industry averages of 12.05% and 3.42%. Its trailing-12-month ROCE, ROTC, and ROTA of negative 22.88%, 13.18%, and 17.61% compare to their respective industry averages of 5.00%, 3.24%, and 1.73%.

POWR Ratings Reflect Bleak Prospects

PATH’s POWR Ratings reflect the company’s bleak outlook. The stock has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PATH has a Value grade of D, in sync with its higher-than-industry valuation. It also has a D grade for Quality, consistent with its poor profitability.

PATH has a D grade for Momentum, consistent with the fact that the stock is trading below its moving averages.

In the 26-stock Software – SAAS industry, it is ranked #24. The industry is rated D.

Click here to see the additional POWR Ratings for PATH (Growth, Stability, and Sentiment).

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

Bottom Line

The layoffs announced by the company could make investors anxious. Moreover, its sharp bottom-line declines are concerning and indicate that market turmoil has affected its business significantly. With the stock trading below its 50 and 200-day moving averages, it might be best avoided now.

How Does UiPath Inc. (PATH) Stack up Against Its Peers?

While PATH has an overall POWR Rating of D, one might consider looking at its industry peers, Park City Group, Inc. (PCYG), which has an overall A (Strong Buy) rating, and Informatica Inc. (INFA) and New Relic, Inc. (NEWR), which have an overall B (Buy) rating.

PATH shares were trading at $12.43 per share on Monday morning, down $0.07 (-0.56%). Year-to-date, PATH has declined -71.18%, versus a -15.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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