Shares of Coupa Software (COUP), a provider of a cloud-based corporate spend management software, have declined more than 20% over the past thirty days, while posting 55% declines in six months. And on a year-to-date basis, the stock has lost more than 30% of its value, while the S&P has declined just 11%. Is now a good time to bet on a recovery?
The company is set to report fourth quarter fiscal 2021 earnings results after Monday’s closing bell. Boasting 100,000-plus potential global customers, Coupa counts companies as large as Walmart (WMT), Salesforce (CRM), Procter & Gamble (PG), among others, as clients. Aiming to become a BSM (Business Spend Management) leader, Coupa makes money by analyzing large quantities of corporate transactional expense data, looking for spending patterns and areas of inefficiency. Its three core segments are aimed at controlling how companies spend money, optimize supply chains, and manage finances.
With its total addressable market measured at $94 billion and growing, Coupa’s platform helps customers with actionable insights that can lead to improved inventory management, smarter purchasing decisions, while lowering expenditures. These collective businesses are growing impressively at double-digit rates. However, Coupa has been dragged down by the recent punishment in tech stocks on fears of rising interest rates and inflation. The company on Monday can change that narrative by delivering a top- and bottom line beat, along with confident guidance.
In the three months that ended January, the San Mateo, CA-based company is expected to earn 5 cents per share on revenue of $185.68 million. This compares to the year-ago quarter when it earned 17 cents per share on revenue of $163.54 million. For the full year, earnings are expected to be 68 cents per share, down from earnings of 77 cents per share a year ago, while full-year revenue of the $717.75 million would rise 32.5% year over year.
Coupa's BSM platform, which includes a comprehensive suite of procurement solutions that helps businesses assess expenditures from things such as sourcing, invoicing as well as travel/expense management, enables customers to realize stronger and more targeted working capital by de-segmenting organizational silos to better assess risks across the organization. Despite the bearish view towards the stock, the company’s business fundamentals remain strong as evidenced by rising operating margin in the third quarter which came in at 11.6% compared with 11.0% a year ago,
With 2,000+ customers and more than 7 million suppliers on its platform, Coupa's platform has also become an asset for data that is generating key business insights. The company has also begun to integrate its platform into various components of its clients such as supply chains finance operations, making itself a more sticky product to discontinue. To date, Coupa has shown it can execute on its stated objectives, beating Wall Street’s revenue and profit estimates in the past ten quarters.
In the third quarter, the company beat on both the top and bottom lines, delivering Q3 EPS of 31 cents which beat estimates by 28 cents, while revenue grew 40% to $185.82 million, higher than the $177 million expected. Q3 billings — indicator of future revenue growth — came in at $193 million, up 38% year over year, while Coupa’s operating cash flows remained strong at $31 million. All told, the stock’s reaction has not reflected how the company has operated. Assuming a top and bottom line beat on Monday, along with confident guidance, Coupa's stock can become the bargain that long-term investors hoped it would.
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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