UiPath trades at $14.32 and has moved in lockstep with the market. Its shares have returned 15% over the last six months while the S&P 500 has gained 10.1%.
Is now the time to buy UiPath, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is UiPath Not Exciting?
We don't have much confidence in UiPath. Here are three reasons you should be careful with PATH and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within software, a stretched historical view may miss new innovations or demand cycles. UiPath’s recent performance shows its demand has slowed as its annualized revenue growth of 13.2% over the last two years was below its five-year trend. 
2. Weak Billings Point to Soft Demand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
UiPath’s billings came in at $433 million in Q3, and over the last four quarters, its year-on-year growth averaged 2.3%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect UiPath’s revenue to rise by 9.5%, a deceleration versus its 24.7% annualized growth for the past five years. This projection doesn't excite us and implies its products and services will face some demand challenges.
Final Judgment
UiPath isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 4.7× forward price-to-sales (or $14.32 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our top software and edge computing picks.
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