UiPath’s stock price has taken a beating over the past six months, shedding 38.7% of its value and falling to $10.11 per share. This might have investors contemplating their next move.
Is there a buying opportunity in UiPath, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is UiPath Not Exciting?
Even though the stock has become cheaper, we're swiping left on UiPath for now. Here are three reasons you should be careful with PATH and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within software, a stretched historical view may miss new innovations or demand cycles. UiPath’s recent performance shows its demand has slowed as its annualized revenue growth of 11% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
2. Weak Billings Point to Soft Demand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
UiPath’s billings came in at $555.3 million in Q4, and over the last four quarters, its year-on-year growth averaged 7.4%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect UiPath’s revenue to rise by 9.1%, a slight deceleration versus its 21.5% annualized growth for the past five years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
Final Judgment
UiPath isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 3.4× forward price-to-sales (or $10.11 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at the most dominant software business in the world.
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