Shares of Coupa Software (COUP), a provider of a cloud-based corporate spend management software, have declined almost 17% over the past thirty days, while posting near 55% declines in six months. And on a year-to-date basis, the stock has lost 64% of its value, while the S&P 500 has declined just 17%.
Is now a good time to buy? The company is set to report second quarter fiscal 2022 earnings results after Tuesday's closing bell. Aiming to become a Business Spend Management leader, Coupa makes money by analyzing large quantities of corporate transactional expense data, looking for spending patterns and areas of inefficiency. The company’s three core segments are aimed at controlling how companies spend money, optimize supply chains, and manage finances. Each segment is growing rapidly.
Boasting 100,000-plus potential global customers, Coupa counts companies as large as Walmart (WMT), Salesforce (CRM), Procter & Gamble (PG), among others, as clients. With its total addressable market measured at $56 billion and growing, Coupa’s platform helps customers with actionable insights that can lead to improved inventory management, smarter purchasing decisions, while lowering expenditures.
Coupa’s platform helps businesses assess expenditures from things such as sourcing, invoicing as well as travel/expense management. However, Coupa has been dragged down by the recent punishment in software stocks on fears of rising interest rates and inflation. Concerns about slower growth and Coupa’s valuation has kept new investors away. The company on Tuesday can change that narrative by delivering a top- and bottom line beat, along with confident guidance.
In the three months that ended July, the San Mateo, CA-based company is expected to earn 9 cents per share on revenue of $204.02 million. This compares to the year-ago quarter when it earned 26 cents per share on revenue of $179.25 million. For the full year, ending January, earnings are expected to be 26 cents per share, down from earnings of 83 cents per share a year ago, while full-year revenue of the $840.27 million would rise 15.9% year over year.
The various financial procurement tools within Coupa’s platform such as supply chains finance operations enable customers to realize stronger and more targeted working capital by de-segmenting organizational silos to better assess risks across the organization. Coupa has also become an asset for data that is generating key business insights given that it has more than 2000 currently clients on its platform.
In the first quarter, although it deliver a double beat, its guidance for the year ahead disappointed investors. Q1 revenue grew 18% year over year to $196.4 million, topping Wall Street's expectations for 14% growth of $190.7 million. Not only was that four-point margin beat impressive, Coupa’s revenue showed no deceleration on a sequential basis. That was notable, especially given the 33% decline in the professional services business.
During the quarter, the company’s bread-and-butter business, the subscription revenue grew 27% year over year, and accounting for 91% of total revenue which marks a rise of seven percentage points year over year. Notably, its billings growth, which are a leading indicator for the business, rose 26% year over year to $188 million, rising above the 17% growth rate in the fourth quarter. Billings are a closely-watched metrics that represent deals signed in the quarter that will be recognized as revenue in future quarters.
All told, the stock’s reaction has not reflected how well the company has operated. Despite the bearish view, Coupa’s business fundamentals remain strong. Assuming a top and bottom line beat on Tuesday, along with confident guidance, Coupa's stock can still produce for long-term investors.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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