Glimpse Group, Inc. (VRAR) in New York City is a virtual reality (VR) and augmented reality (AR) company that provides enterprise-focused software, services, and solutions in the United States. VRAR’s shares soared in price on their first trading day in July. The stock climbed above $18 on day one, from its $7.00 public offering price per share. However, the hype did not last, and the shares soon thereafter retreated back to the offer price. However, the stock has gained significantly over the past three months and is currently trading above its 50-day and 200-day moving averages.

The AR and VR markets are booming due to their adoption in several verticals. VRAR has been investing substantially to enhance its portfolio offerings, acquisitions, and strategic partnerships. In September, VRAR announced the acquisition of the assets of XR Terra, a provider of VR and AR software development and design training courses. The acquisition was structured as an asset acquisition, and VRAR assumed no liabilities. Moreover, this marks VRAR’s eleventh acquisition of a subsidiary company. The company also began development in the Non-Fungible Token (“NFT”) space. VRAR is focusing on utilizing the robust technologies of its subsidiary companies in the emerging NFT and Crypto segments. The company has also completed several partnerships over the past few months.

However, VRAR’s operating expenses increased 67% year-over-year in the company’s last reported quarter, leading to negative operating income of $1.40 million. Also, its net loss came in at $1.66 million, indicating a 29.7% increase year-over-year. The increase in expenses can be attributed to increased employee headcount to support growth, and expenses specific to VRAR status as a publicly-traded company.

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

Stretched Valuation

In terms of trailing-12-months EV/Sales, VRAR is currently trading at 35.38x, which is 691.3% higher than the 4.47x industry average Also, its 25.75 trailing-12-months Price/Sales ratio is 515% higher than the 4.19 industry average. And VRAR’s trailing-12-month Price/Book is 131.5% higher than the 4.67x industry average.

Mixed Profitability

VRAR’s 64.88% gross profit margin is 30.89% higher than the 49.57% industry average. Also, its 66.09% levered FCF margin is 453.5% higher than the 11.94% industry average.

However, VRAR’s ROE, ROA, and ROTC of negative 103.30%, 44.29%, and 29.54%, respectively, compare with the 8.16%, 3.57%, and 4.93% industry averages.

Top Line Growth Does Not Translate into Bottom-Line Improvement

VRAR’s total revenues increased 292% year-over-year to $1.02 million in its fiscal first quarter, ended September 30. However, its net loss from operations stood at $1.40 million, up 12.7% from the same period last year. Its net loss grew 29.7% from its year-ago value to $1.66 million, while its net loss per share came in at $0.17, indicating a marginal decline from its year-ago value of $0.18. Furthermore, its trailing-12-month EBITDA and net income came in at negative $3.47 million and $6.47 million, respectively.

POWR Ratings Reflect Uncertainty

VRAR has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of C for Quality, in sync with its mixed profitability.

VRAR has a D grade for Stability. This is justified as the stock has a beta of 1.66.

Of the 168 stocks in the Software – Application industry, VRAR is ranked #92.

Beyond what I have stated above, one can view VRAR’s grades for Value, Growth, Momentum, and Sentiment here.

View the top-rated stocks in the Software – Application industry here.

Click here to check out our Software Industry Report for 2021

Bottom Line

Given the growth potential of the digital reality space, VRAR’s long-term prospects look bright considering its strategic acquisitions and establishment of key partnerships. Also, the company’s new venture in the NFT space should drive growth. However, its near-term prospects look uncertain. The stock looks overvalued at its  current price level. Also, given its high volatility, we think it could be wise to wait for a better entry point in the stock.

How Does Glimpse Group, Inc., (VRAR) Stack Up Against its Peers?

While VRAR has an overall POWR Rating of C, one might want to consider looking at its industry peers, Open Text Corporation (OTEX), American Software, Inc. (AMSWA), and Commvault Systems Inc. (CVLT), which have an A (Strong Buy) rating.

VRAR shares fell $0.88 (-6.53%) in premarket trading Friday. Year-to-date, VRAR has declined -28.65%, versus a 24.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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