Is there still a way for the software company UiPath to grow?

UiPath Inc. (PATH), a company that makes automation software solutions, is trading about 70% below its 52-week high. At first, investors were impressed by how quickly the company grew, but as it slowed down, quotes went down. Will the business be able to start growing again soon? Quotes for UiPath “jumped” at the beginning of June after the company said that growth had been strong in the first quarter of fiscal year 2023.

The company’s sales went up by 32% from the previous year to $245 million, which is more than Wall Street had predicted. The company reported an adjusted net loss of $17.5 million, compared to an adjusted net profit of $11.7 million the year before. Even though the first quarter was good, it wasn’t enough to make up for the losses. UiPath’s main product is software that automates routine tasks like processing invoices, managing inventory, registering customers, entering data, sending emails, etc. Customers are interested in UiPath because it was one of the first companies to move in this direction.

For small businesses, the average cost of a subscription to the company’s software is between $420 and $1,930 per month. Large customers, on the other hand, usually get services that cost more. In fact, UiPath solutions help improve workflows and reduce the number of employees. After strong double-digit and even triple-digit growth rates in fiscal years 2020–2022, growth has slowed this year. The company said this was because of problems in the world and a strong dollar, both of which hurt sales. At the same time, the shares are trading at 10 times the estimated revenue, which makes UiPath more expensive than other software companies with similar sales growth.

At the same time, the company’s net profit is still in the red. The GAAP net loss went from $520 million in fiscal 2020 to $92 million in fiscal 2021, but it went back up to $525 million in fiscal 2022. Analysts think that the GAAP net loss will only go down a little bit to $403 million in the fiscal year 2023. A big part of these losses is due to compensation costs after the stock split. In the first quarter of fiscal year 2023, this took up about 41% of revenues. Because of this, the total weighted average number of UiPath shares went up by 152% from one year to the next.

Also, UiPath’s gross margin is not improving. So, slowing the growth of income and having a stock price that is too high could slow the return of UiPath to the growth of quotations. On the other hand, the company has a high rate of keeping customers: about 138 percent. UiPath ended the quarter with no debt and $1.8 billion in cash and other liquid assets. That is, UiPath has a strong business, even though it will take some time to win back the trust of investors.