Verb Technology Company, Inc. (VERB - Get Rating) in Newport Beach, Calif., develops Software-as-a-Service application platforms internationally. The company recently announced its partnership with Momentum Factor to provide direct sales companies with the first of its kind social compliance solution.

The stock has declined 23.8% in price over the past month and 76.8% over the past nine months to close yesterday’s trading session at $0.48. VERB is currently trading 87.9% below its 52-week high of $3.97, which it hit on July 15, 2021.

The company recently entered a securities purchase agreement with institutional investors to purchase and sell 14.67 million shares of its common stock in a registered direct offering priced at the market, resulting in total gross proceeds of $11 million. This has diluted the ownership percentage of existing shareholders. So, VERB’s near-term prospects look bleak.

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

Top Line Growth Does Not Translate into Bottom Line Improvement

For its fiscal first quarter ended March 31, 2022, VERB’s revenue surged 6.5% year-over-year to $2.69 million. However, its modified EBITDA loss came in at 5.47 million compared to $6.51 million in the previous year’s quarter. Its net loss was $6.99 million, compared to $8.35 million in the prior-year period. Also, its loss per share came in at $0.09, compared to $0.16 in the year-ago period.

Low Profitability

In terms of trailing-12-month CAPEX/Sales, VERB’s 0.24% is 89.6% lower than the 2.35% industry average. Its 0.26% trailing-12-month asset turnover ratio is 58.7% lower than the 0.63% industry average. Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the 7.81%, 4.80%, and 3.48% respective industry averages.

Stretched Valuation

In terms of forward EV/S, VERB’s 3.40x is 22% higher than the 2.79x industry average. And its 2.77x forward P/S is higher than the 2.69x industry average.

POWR Ratings Reflect Bleak Prospects

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

Our proprietary rating system also evaluates each stock based on eight distinct categories. VERB has an F grade for Quality, in sync with its lower-than-industry profitability ratios.

The stock has a D grade for Stability, which is consistent with its 1.08 beta. In addition, VERB has a D grade for Sentiment. This is justified because analysts expect its EPS to remain negative in the current quarter, next quarter, current year, and next year.

VERB is ranked #132 out of 156 stocks in the F-rated Software – Application industry. Click here to access VERB’s Growth, Value, and Momentum ratings.

Click here to check out our Software Industry Report for 2022

Bottom Line

VERB is currently trading below its 50-day and 200-day moving averages of $0.71 and $1.41, respectively, indicating a downtrend. Because the stock looks overvalued at its  current price level, we think it  best to avoid it now.

How Does Purple Innovation (VERB) Stack Up Against its Peers?

While VERB has an overall POWR Rating of D, one might want to consider investing in the following Software – Application stocks with an A (Strong Buy) rating: Commvault Systems, Inc. (CVLT - Get Rating), Rimini Street Inc. (RMNI - Get Rating), and Progress Software Corporation (PRGS - Get Rating).

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VERB shares were trading at $0.49 per share on Wednesday morning, up $0.01 (+2.08%). Year-to-date, VERB has declined -60.48%, versus a -16.46% 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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