UiPath Stock Overview | Trader’s ABC





In April 2020, UiPath (NYSE: PATH) went public at $ 56 per share. It is noteworthy that the price of the outstanding shares jumped 23% on the very first day after the IPO. Not surprisingly, though, investors rushed to buy these tech stocks as soon as they became available to the general public. UiPath’s business is based on two in-demand modern technologies:

  1. Robotic Process Automation (RPA);
  2. Artificial intelligence (AI).

Both directions have great potential in the future.

However, sometimes it happens that the excitement and hype in the press, which has appeared out of nowhere, affects the share price more than the real fundamental indicators of the issuing company. Therefore, before investing our hard-earned money, let’s take a closer look at the entire UiPath business and assess its long-term prospects.

uipath

Market opportunities

UiPath has a worthy mission: to provide complete automation of all production processes of the enterprise. The company’s platform defines tasks that can be automated and then helps clients create software robots that automate those tasks. This is nothing more than RPA – robotic process automation.

The UiPath platform combines RPA and AI, including natural language processing, computer vision, and machine learning. To understand why this is important, let’s dive into these terms.

RPA includes the automation of manual tasks such as filling out forms and extracting data from documents. Natural language processing and computer vision enable robots to understand these forms and documents. Machine learning takes it one step further by “forcing” robots to learn, which means they get smarter over time.

The combination of RPA and AI allows customers to create software robots that learn from human behavior, allowing even highly complex tasks to be automated.

In other words, UiPath can transform businesses by replacing humans with robots. This will greatly improve their efficiency, freeing people from tedious, routine tasks, allowing them to spend their time on more valuable activities.

At the moment, UiPath estimates its current market opportunities at $ 60 billion, but the company expects this figure to grow over time.

Competitive position

Traditionally, automation has been designed for software developers and engineers. It was difficult for a person who did not have special skills in this area to understand them. UiPath solves this problem. Its end-to-end platform democratizes automation and can be used by all employees, regardless of job title, skill level, or technical background.

This is a significant advantage that differentiates UiPath from traditional RPA solutions. For example, the company estimates that simple automation can save the average employee 20 minutes a day. If the enterprise provided 10,000 employees with software robots, these simple automation could save the enterprise $ 30 million a year.

Gartner has recognized UiPath as a leader in the RPA market, and its ability to handle complex processes is a key differentiator. More recently, research firm Forrester has also highlighted UiPath’s leadership, citing competitive advantages such as:

  • Stronger current supply;
  • Stronger growth strategy.

Financial performance

The best-in-class solution has helped the company win thousands of customers across a wide range of industries. In particular, these include tech giants like Adobe Systems, cybersecurity firms like CrowdStrike, car manufacturers like Toyota, mobile companies like Uber, and restaurants like Chipotle.

In fact, the company had 7,968 customers as of January 31, 2021, up from 2,671 just two years earlier. In other words, UiPath’s customer base has grown by 198% in this short period of time. This led to a corresponding increase in income:

Indicator20192021CAGR
Income, million $148.5607.6102%
SOURCE: UIPATH SEC FILINGS. CAGR: COMPOSED ANNUAL GROWTH RATE

While UiPath’s business is not currently profitable, it generated positive free cash flow of $ 26 million during fiscal 2021. This is a good sign that the company’s business is self-sufficient. In other words, the company will not need to issue debt or dilute equity to finance its future growth.

During 2021, UiPath had a net retention rate of 145%. This speaks to the “stickiness” of its platform – it is difficult for customers to switch to another product after they start using it. This should help UiPath continue to grow rapidly over the coming years.

Output

It is important for investors to understand how the company shares spheres of influence with the main competitors in its industry, how it fits into the competitive environment. In this case, despite the fact that UiPath has serious competitors that are much larger than it (take Microsoft for example), it was able to master a fairly large market share. This is impressive.

UiPath has recently become a public company and is still quite heavily dependent on swings in public opinion. The price of its shares can fluctuate quite strongly depending on the changing sentiment of investors. It should be noted how UiPath handles this transition from novice to regular stock quote table.

With significant market opportunities, strong competitive position and strong revenue growth, UiPath looks like a long-term winner. Of course, it’s impossible to predict exactly what will happen to the company in the future, but I would not be surprised if in the next five years its shares double or even triple in value.

Review from 06/08/2021

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