- UiPath (PATH) has been an absolute flop since the company’s initial public offering (IPO).
- Despite its revenue growth, UiPath’s bottom-line figures indicate a deepening financial hole.
- Investors can consider the potential of the automation software market while avoiding PATH stock altogether.
Based in New York, UiPath (NYSE:PATH) is an enterprise automation software maker. This might sound like an enticing company to invest in. However, even if you’re on board with automation as a business segment, it is a wise idea to stay away from PATH stock.
Some folks might suggest that UiPath is, directly or indirectly, responsible for human workers being replaced by robots. On the other hand, it could be argued that modern businesses must automate some processes in order to remain competitive. Feel free to weigh the merits and pitfalls of automation software and form your own conclusion. Perhaps it is a segment that’s worth investing in — but this doesn’t necessarily apply to PATH stock in particular.
In the final analysis, you’ll likely find that UiPath isn’t on the right financial path, especially when it comes to profitability — or the lack thereof. Knowing this, cautious investors can choose to sidestep any future problems that UiPath may encounter.
What’s Happening with PATH Stock?
Sometimes, financial market traders talk about support levels in stocks. Can there be any meaningful support levels, though, if a stock just keeps going down? PATH stock, unfortunately, provides a textbook example of this problem. Going back to the beginning, UiPath went public on Apr. 21, 2021 with an IPO price of $56. The stock peaked early at exactly $90 on May 28 of that year.
Peaking early can be an ominous sign in the stock market. It suggests that the initial burst of enthusiasm for UiPath was based on hype rather than on solid fundamentals. After the quick pop, PATH stock embarked on a painful and relentless downhill slide. There haven’t been any identifiable bounce points, so the concept of support simply doesn’t apply here.
Shockingly, the UiPath share price fell below $20 not long ago and can’t seem to catch a bid. Bottom fishers might mistake this scenario for a bargain, but let’s not confuse a falling price with a good value.
It’s difficult to even place a value on PATH stock now, as UiPath has no price-to-earnings (P/E) ratio. That’s because the company has no earnings, which is, of course, a bad sign.
Big Loss, Bigger Deficit
Revenue growth is relevant and should be taken into consideration when evaluating an investable business. There is no denying this, but revenue isn’t the only data point to look at.
In full-year fiscal 2022, which mostly covers 2021, since it ended on Jan. 31, 2022, UiPath grew its revenue. That’s all fine and good, but informed investors shouldn’t place more importance on top-line results than on bottom-line results.
To get the full scoop, we’ll need to bypass the promotion-fueled press releases and turn to UiPath’s Form 10-K. On it, UiPath warns that the company has “experienced net losses in each fiscal year since inception.” That is a glaring red flag if there ever was one. When we break down the numbers, the flag only gets bigger and scarier.
In the fiscal year ended Jan. 31, 2021, UiPath incurred a net earnings loss totaling $92.4 million. That is already unsettling for a relatively small start-up business. It only gets worse from there, though. Astoundingly, UiPath’s net earnings loss ballooned to $525.6 million during the fiscal year ended Jan. 31, 2022. Moreover, as of Jan. 31, 2021 and 2022, UiPath had an accumulated deficit of $970.4 million and $1.495 billion, respectively.
Of course, UiPath didn’t put these facts front-and-center in its full-year fiscal 2022 press release. These are stats which must be dug up and each investor should consider thelselves as a financial archaeologist, so to speak.
What You Can Do Now
Maybe you approve of automation software, or maybe you don’t. Either way, it is certainly possible that there’s a niche business sector with growth potential here.
Still, this doesn’t mean that UiPath is a good representative of this sector. While UiPath veers away from profitability, investors should remain cautious and keep their distance from PATH stock. UiPath currently earns an “F” rating in my Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.