Robotic process automation (RPA) software provider. UiPath (NYSE: PATH) recorded a stellar jump. Since the start of 2023, stock prices have risen more than 80%, and a quarterly update for the fourth quarter of fiscal 2024 (for the three months ending January 2024) helped support the rally. The company posted its first profit based on generally accepted accounting principles (GAAP), on top of growing quarterly revenue by 31% compared to the previous year.
UiPath’s management shakeup last summer has paid off handsomely, and in the new era of artificial intelligence (AI), the company’s RPA platform looks poised to continue delivering good for shareholders. Here’s what investors need to know.
A new era of growth and profitability
Following the US Federal Reserve’s 2022-2023 interest rate hike plan to try to tame inflation, investors have collectively demanded that software companies work to increase their profit margins – even small “growth first” companies like UiPath . It did not reach the GAAP profitability milestone the fastest. Despite this, UiPath became profitable on all counts to close its latest fiscal year.
|
UiPath metrics |
Fourth quarter of fiscal year 2024 |
Fourth quarter of fiscal year 2023 |
Change (YOY) |
|---|---|---|---|
|
Income |
405 million dollars |
309 million dollars |
31% |
|
Annual recurring revenue (ARR) |
1.46 billion dollars |
1.2 billion dollars |
22% |
|
GAAP net profit (loss) |
33.9 million dollars |
($27.7 million) |
ON |
|
Full-year free cash flow (loss) |
292 million dollars |
($33.8 million) |
ON |
Data source: UiPath. YOY= year on year.
In addition to turning the page on profitability, UiPath also began a stock buyback plan to offset the effects of employee stock-based compensation (SBC). In the second half of 2023, $103 million worth of stock was repurchased, partially offsetting $372 million in employee SBC last year — which, importantly, was unchanged from a year ago. There is room for significantly higher margins for UiPath in the coming years as it expands its software business.
Is UiPath the best stock of AI and “robotics”?
As management has pointed out all along, the arrival of the new era of artificial intelligence is really all about automation — helping companies do more with the same or fewer resources. UiPath is in a prime position to help on this front. Its software-based robots are already hard at work in the cloud and installed in many organizations’ on-premise operations, delivering high ROI.
A prime example of this is UiPath’s Test Suite service, which can automate quality checks and testing of new software and processes before they go live. CEO Robert Enslin said on the earnings call that according to one of UiPath’s studies, its Test Suite users get back what they paid for the service in just six months.
The utility of this robotics software platform continues to show in the company’s growth guidance. Enslin and the top team forecast revenue for the full fiscal year 2025 (the 12-month period ending next January) to be around $1.56 billion, which would represent an increase of 19%. Annual revenue (ARR) at the end of the fiscal year in January 2025 is expected to be around $1.73 billion, up around 18% from the recently ended quarter.
If UiPath continues to raise the bar on its profitability along the way, so much the better. At just over 50 times trailing 12-month free cash flow and 40 times the Wall Street analyst consensus for GAAP earnings per share this year, I still consider this a great average dollar share price – as well a bet on cloud computing and robotics automation industry.
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Nicholas Rossolillo and his clients have positions in UiPath. The Motley Fool has positions and recommends UiPath. The Motley Fool has a disclosure policy.
1 Software Stocks See Huge Profit Jump – Is It the Best Buy for 2024 and Beyond? was originally published by The Motley Fool