Down 80% in 1 year, is it time to buy UiPath stock?

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The stock market has been trampled on recently, and you don’t have to look far to find out why. Inflation hit 40-year highs, the Fed began its series of interest rate hikes in response, and a host of macroeconomic concerns were intensified by the war between Russia and Ukraine.

Fast-growing tech stocks, especially those that aren’t profitable and don’t yet have positive cash flow, have taken the biggest hit. Investors continue to seek refuge in value stocks and safer assets to shield themselves from the high degree of uncertainty that scares the market today.

The ongoing correction has created promising opportunities to acquire shares of several companies at modest valuations. One of these companies, UiPath (WAY 15.38%)saw its share price plunge 80% over a one-year period, a dramatic slump from the S&P500negative return of 3% in the same time frame.

UiPath is a robotic process automation (RPA) tool that provides solutions for businesses to automate routine office activities. In its own words, the company “creates software robots so people don’t have to be robots.” With a long growth streak, the business could quickly expand and generate fortunes for those willing to ride out short-term headwinds.

So, is it time to buy UiPath shares?

Image source: Getty Images.

Progress financially

Despite what the pattern of its share price suggests, the RPA company is in a stable state. In its 2022 fiscal year (which ended Jan. 31), total sales climbed 47% year-over-year to $892.3 million, and the company posted an adjusted profit positive per share of $0.08. With 10,100 customers globally, its annual renewal rate (ARR) soared 59% to $925 million, and customers generating more than $100,000 in ARR increased 49% to 1,493.

Due primarily to economic impacts in Russia and exchange rate headwinds, growth is expected to slow significantly in the coming year. As a result, analysts expect UiPath’s revenue to grow 21% to $1.08 billion, and adjusted profit to decline to a loss of $0.02.

Investors need not worry, however: not only is growth above 20% still valid, but the company’s long-term business prospects also remain unchanged. Additionally, its $1.8 billion cash position and negligible debt of $50 million gives the company immense financial flexibility.

First steps in the growth story

Perhaps the most intriguing element of UiPath’s investment thesis is its long growth streak. According to Precedence Research, the global robotic process automation market is expected to grow at a compound annual growth rate (CAGR) of nearly 30% through 2030. Management estimates its addressable market at $60 billion, implying that UiPath has only captured about 2% of its revenue opportunities so far.

If the company can capture 10% of this addressable market, it would generate annual sales of $6 billion, or 572% more than its fiscal year 2022 revenue. So UiPath is just beginning to scratch the surface of this. which could be massive secular growth. And given that the stock is trading below 8 times the sell and approaching 52-week lows, investors have a strong margin of safety.

Should you buy UiPath today?

There’s a lot to love about UiPath right now. Apart from its impressive growth, dwindling valuation, and huge addressable market, the company is a founder-led business. Daniel Dines, who launched the company in 2005, is now the CEO. In total, insiders hold a 21% stake in RPA shares, a clear signal that management’s priorities are aligned with those of its shareholders.

Short-term headwinds and broader negative sentiment could govern its stock price for the foreseeable future, but the emerging RPA leader could be a big winner in the long run. Patient investors looking for a great growth game should buy UiPath today.

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