Looking to invest in the “bot revolution”? New York-headquartered UiPath (NYSE:PATH) is an enterprise automation software maker, and this might tempt you to consider PATH stock. However, a thorough analysis into UiPath’s financials might cause you to think twice before taking a position.
Robots and automation are all the rage now. OpenAI’s ChatGPT program has brought automation to the public’s attention. Many retail traders want to cash in on this emerging trend.
Be aware, though, that UiPath provides automation solutions for business enterprises, and isn’t exactly in the same niche market segment as OpenAI. Thus, it’s essential to conduct your due diligence on UiPath before making any financial decisions, as a hasty trade could lead to disappointment and capital loss.
PATH Stock Goes Down the Wrong Path
Hyper-growth tech stocks caught a bid in late 2020 and most of 2021. This was the post-Covid-19-crisis period, when some traders bought shares of companies like UiPath without looking at their financials.
Then came the reality check of 2022. Amid rising inflation and a series of interest-rate hikes, businesses cut back on their expenditures and prioritized needs over wants. Some businesses might consider UiPath’s software a luxury rather than a necessity.
Hence, PATH stock dropped from $85 to $15, leaving some investors to hold a heavy bag. Along the way, UiPath joined the tech layoff club, reducing its headcount by 5% in order to cut costs.
“This is about continuing to drive sustained, profitable growth,” a UiPath spokesperson stated. Is UiPath actually a profitable business, though?
UiPath Is Still a Money-Losing Business
Here’s an example of why it’s important to read the fine print in a company’s financial forms. A Form 10-Q reveals that UiPath wasn’t profitable in 2021’s fourth quarter, and was also unprofitable in the year-earlier quarter.
For the three months ended Dec. 31, 2022, UiPath incurred a net earnings loss of $57.72 million, or 10 cents per share at that time. So, UiPath can’t currently claim to be on a path of “sustained, profitable growth.”
This doesn’t mean you can’t be bullish on the enterprise automation software market. One survey found that “54% of organizations are already using enterprise automation technologies to help implement sustainability initiatives,” plus, “another 24% plan to do so in the coming two years.”
In other words, the enterprise automation software industry has room to grow over the coming years. It’s still a sensible policy, however, to focus on stocks that are on an upward long-term trajectory, and on businesses that are profitable or at least close to breakeven.
What You Can Do Now
UiPath probably won’t check all of the boxes for folks who focus on financials. Still, you don’t have to ignore UiPath completely.
If you have a strong conviction in enterprise automation technologies, feel free to put UiPath on your watch list and check back for updates on the company. Perhaps UiPath might turn a profit at some point or at least get very close to that goal. Then, PATH stock may be worth considering for a long position.
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.