<div id="readability-page-1"><p>In the competitive business world, even small increases in efficiency can propel a company to success over its rivals. Artificial intelligence (AI) and robotic process automation (RPA) can help create those increases, making them incredible tools for productivity.</p> <p>One large financial and home loan company, for instance, integrated RPA provided by <strong>UiPath</strong> <span>(PATH<span> -2.18%</span>)</span> into its workflow and said the changes saved it 10,000 man-hours annually. These robots perform functions using off-the-shelf software that was previously done manually. Perhaps the best part is that these RPA services are nearly 100% accurate and work 24 hours a day.</p> <p>The profitability and growth implications for the client company are massive. It gets more done with fewer employees, more accurately, and the robot tools allow those employees to work on high-level, mission-critical tasks rather than repetitive, lower-level ones. Examples like this show why UiPath has potential as a company.</p> <h2>UiPath started strong but took a hit like many tech stocks did in 2022</h2> <p>That potential was evident when UiPath went public in early 2021 and started out as a high-flying tech stock during the market boom going on at the time. As 2021 progressed though, the threat of interest rate increases took a toll on many high-flying tech stocks and Wall Street began to sour on the business automation software developer. The stock is trading down about 52% from its 52-week highs and about 82% from its all-time highs.</p>  <p>In this raised interest-rate economic environment, the company is dealing with serious challenges, including increased competition, difficulty increasing its customer base, and management changes. For investors considering UiPath's stock today, its valuation is much more reasonable and it has some positives to factor in along with the challenges. Finding inexpensively valued comeback companies to invest in can be a terrific way to juice your long-term gains. Here's why I think UiPath could be one of those comeback stories.</p> <h2>Why did UiPath's stock tumble in 2024?</h2> <p>UiPath's stock was in a slow recovery mode through much of 2023 and into 2024. However, the stock took a significant fall after it delivered its latest earnings report in late May. Management lowered its full-year annual recurring revenue (ARR) guidance from $1.73 billion to $1.66 billion. A 4% guidance cut may not seem significant, but any guidance cut is significant for growing tech companies (companies tend to guide for easily reachable targets so they can beat them). Even more concerning, management lowered its full-year revenue guidance by 10% from $1.56 billion to $1.41 billion. With a dollar-based net retention rate of 118% (its existing customers spent 18% more than they had in the prior year), the downgraded revenue target indicates that it lost customers.</p> <p>Another contributor to the stock drop was news that CEO Rob Enslin, who took over just four months ago, resigned suddenly. While Enslin was only CEO briefly (he had been co-CEO since 2022 along with company founder Daniel Dines) the fact that he didn't last long was a red flag for some investors. Dines returns to the CEO role, which should help settle things while management considers its next steps. Returning founders can sometimes also rejuvenate a company because of their passion and insider knowledge of the business. So this could end up being a positive development.</p> <h2>Positive cash flow, a strong balance sheet, and a massive market</h2> <p>UiPath is clearly trying to deal with some challenges. But there are also opportunities.</p> <p>As mentioned above, the return of its founder could kick-start UiPath. The business wasn't thriving under Enslin, so new (old?) leadership offers an opportunity for changes. Dines has a personal stake in UiPath's success and has a lot to work with.</p> <p>While UiPath's revenue growth has slowed, it hasn't stalled completely. ARR increased 21% year over year last quarter, while sales grew 16%. UiPath's cash flow is also positive, with an impressive 24% margin over the last four reported quarters.</p> <p><img src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/256a0ae59e9ad23144778034ab5c7012.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="720" height="507" original-src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/256a0ae59e9ad23144778034ab5c7012.png"/></p> <p>PATH Revenue (TTM) data by YCharts.</p> <p>Also, while there appears to have been some customer attrition, there are bright spots. The number of large customers that provide more than $100,000 and $1 million in annual sales increased again last quarter.</p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy83ODgyNDYvdWlwYXRoLWxhcmdlLWN1c3RvbWVycy5wbmcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="363" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy83ODgyNDYvdWlwYXRoLWxhcmdlLWN1c3RvbWVycy5wbmcmdz03MDA"/></p><p>Source: UiPath.</p> </div> <p>Dines is taking over a company that's in decent financial health. UiPath has nearly $2 billion in cash and investments on its books, no long-term debt, and just $598 million in current liabilities compared to $2.5 billion in current assets. That balance sheet will allow the company to fund growth, research and development, and strategic acquisitions.</p> <p>Statista forecasts that the RPA market will grow at a compound annual rate of 37% through 2032, going from $3.7 billion in 2022 to over $80 billion. Even capturing a modest fraction of this market would be massive for a small company like UiPath.</p> <h2>Is UiPath stock a buy now?</h2> <p>The stock's valuation of about 5.2 times sales reflects the immense challenges UiPath faces. That price-to-sales (P/S) ratio is less than two-thirds of its recent average and lower than peers. For instance, <strong>Gitlab</strong> and <strong>CommVault Systems</strong> trade at significantly higher valuations.</p> <p><img src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/61d61b8c5a2dfcd9f12b1260450bbfd0.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="720" height="553" original-src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/61d61b8c5a2dfcd9f12b1260450bbfd0.png"/></p> <p>PATH PS Ratio data by YCharts.</p> <p>These software companies do different things, but they are all growing tech companies with market caps between $6.5 billion and $7.5 billion and gross margins over 80%. The similarities make their valuations relevant.</p> <p>UiPath's success is far from guaranteed. However, it appears the market is pricing in all the challenges and none of the opportunities for this company. While investing a large portion of your portfolio in UiPath would be unwise, its comeback opportunity makes it a speculative buy for long-term investors who don't mind some risk.</p>  </div>

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<p>UiPath faces challenges in a high-interest-rate environment, leading to a significant decline in its stock price, down 52% from its 52-week high. Despite lowered revenue guidance and the sudden resignation of CEO Rob Enslin, the return of founder Daniel Dines could rejuvenate the company. UiPath maintains positive cash flow, strong margins, and a solid balance sheet with no debt. With an expected 37% annual growth in the RPA market, there's potential for recovery despite recent setbacks.</p>

Everyone's Giving Up on UiPath Stock. Here's Why I'm Not.