Down Over 30%, Is Coupa Software Stock a Buy?

Down Over 30%, Is Coupa Software Stock a Buy?

Coupa Software program (NASDAQ:COUP) just capped off an remarkable yr with a reliable fourth-quarter earnings report. Profits improved 47% 12 months above 12 months to $164 million as the organization cost management program platform proceeds to advantage from the fast migration to cloud computing.

Yet, shares are down 35% from all-time highs as of this producing as the promote-off in tech shares carries on. But ahead of getting the dip here, get a tough glance at the firm’s steering for the year in advance.

Two people pictured off screen looking at a tablet.

Impression resource: Getty Photographs.

It is all about the future

Very first, let’s admit Coupa’s wonderful run during its most current fiscal 12 months (the 12 months ended Jan. 31, 2021). Soon after providing 50% gross sales development the prior yr, the business was capable to stack on an additional best-line acquire of 39% in fiscal 2021 as enterprises transitioned to cloud-dependent program. Coupa’s system assists with issues like company paying out and analytics, product sourcing, and automatic invoicing and payments. Presented the out of the blue distant workforce lots of businesses have necessary to undertake, it really is no surprise development held solid for the business right after lockdowns began very last spring.  

Period

Revenue

YOY Modify

Fiscal 2020

$390 million

50%

Q1 2021

$119 million

47%

Q2 2021

$126 million

32%

Q3 2021

$133 million

31%

Q4 2021

$164 million

47%

Knowledge supply: Coupa Software package. YOY = yr-around-year.

But this hyper-expansion stock is anticipating a slowdown in the year in advance. Administration is guiding for “only” 28% yr-in excess of-calendar year development in its fiscal 2022 initially quarter and “only” 25% development for the entire year. Coupa, like other cloud computing program companies, has a inclination to beneath-assure but later about-provide. On the other hand, a neat-off in its advancement trajectory is absolutely in the works as it starts off to lap the initial results from the pandemic a 12 months ago.

Bear in intellect this also consists of the current $1.5 billion acquisition of source chain program enterprise LLamsoft last November. LLamsoft was reporting about $105 million in once-a-year revenue final year, but Coupa will be migrating the firm’s legacy sales around to a cloud-dependent product, and it expects that to negatively have an impact on income recognition for the upcoming two years.

Numerous investors feared a slowdown for the firm as the overall economy started off to reopen, and some of these headwinds are in truth materializing. Though Coupa’s upside unquestionably is not at possibility long phrase, it does appear some of its long run advancement was pulled ahead for the duration of the COVID-19 disaster.

A far better offer doesn’t signify a fantastic deal

Right after shares have taken a drubbing in recent weeks, Coupa inventory trades for 33 moments trailing 12-thirty day period gross sales and 26 situations anticipated fiscal 2022 sales. It is a hefty price tag-to-product sales quality that indicates this software company will continue on to grow at a immediate pace for many years to occur.  

While some tech shares are promotions soon after the offer-off, this a single won’t look like 1 of them — at least not still. Coupa’s growth forecast, including its massive acquisition, is underwhelming. You should not get me erroneous, I assume the deal is a excellent transfer for the business enterprise, but it however indicates an even sharper deceleration for the firm’s current platform.

Possibly points will decide on up the speed yet again as the 12 months progresses — Coupa’s goal to provide a extensive-phrase normal of 30% annual income development was reiterated on the last earnings call. But for now, it truly is way too substantial a rate for me to make the jump presented the lackluster view for the calendar year in advance.

This posting signifies the viewpoint of the writer, who may perhaps disagree with the “official” recommendation placement of a Motley Fool quality advisory assistance. We’re motley! Questioning an investing thesis — even one of our have — aids us all believe critically about investing and make selections that support us come to be smarter, happier, and richer.