Upland Software (UPLD) is one of the most watched stocks by Zacks.com visitors lately. So it might be a good idea to take a look at some factors that could impact the stock’s short-term performance.
Shares of this maker of cloud-based business work management software have risen +74.1% over the past month, versus a +5.8% rise in the Zacks S&P 500 composite. The Zacks Internet Software industry, which includes Upland Software, is up 8.5% in the period. The most important question now is: where could the stock go in the short term?
While media reports or rumors about a significant change in a company’s business prospects usually cause stock prices to rise and lead to an immediate price change, there are always certain fundamental factors that ultimately determine the buy-and-hold decision.
Here at Zacks, we prioritize assessing the change in a company’s future earnings projection above everything else. That’s because we believe that the present value of the future income stream determines the fair value of the stock.
Our analysis is based primarily on how sell-side analysts who cover the stock revise their earnings estimates to take into account the latest business trends. When earnings expectations for a company rise, the fair value of its shares also rises. And when the fair value of a stock is higher than the current market price, investors tend to buy the stock, causing the price to rise. For this reason, empirical studies indicate a strong correlation between earnings estimate revision trends and near-term stock price movements.
Upland Software is expected to post earnings of $0.24 per share for the current quarter, which represents a year-over-year change of +71.4%. Over the past 30 days, the Zacks Consensus Estimate has changed +75%.
The consensus earnings estimate of $1.04 for the current fiscal year indicates a year-over-year change of +7.2%. This estimate has changed by +109.7% over the past 30 days.
For the next fiscal year, the consensus forecast of $0.99 indicates a change of -4.8% from what Upland Software is expected to report a year ago. Over the past month, the estimate has changed by +8.8%.
With a strong outside-audited track record, our proprietary stock rating tool, the Zacks Rank, provides a more compelling picture of a stock’s near-term price direction because it effectively harnesses the power of earnings estimate revisions. Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, Upland Software is rated a Zacks Rank #1 (Strong Buy).
The chart below shows the evolution of the company’s forward twelve-month consensus EPS estimate:
While earnings growth is perhaps the most superior indicator of a company’s financial health, nothing happens if a company fails to grow its earnings. After all, it is virtually impossible for a company to increase its revenues for an extended period of time without increasing its earnings. So it is important to know a company’s potential revenue growth.
For Upland Software, the consensus current quarter revenue estimate of $68.06 million indicates a year-over-year change of -5.7%. For the current and subsequent fiscal years, estimates of $274.83 million and $266.9 million indicate changes of -7.7% and -2.9%, respectively.
Upland Software reported revenue of $66.69 million in the last reported quarter, representing a year-over-year change of -10%. Earnings per share of $0.42 for the same period, compared to $0.33 a year ago.
Compared to the Zacks Consensus Estimate of $67.13 million, reported revenues represent a surprise of -0.65%. The EPS surprise was +90.91%.
Over the last four quarters, Upland Software has surpassed consensus EPS estimates three times. The company exceeded consensus revenue expectations three times during this period.
No investment decision can be efficient without taking into account the valuation of a stock. Whether a stock’s current price accurately reflects the intrinsic value of the underlying company and the company’s growth prospects is a key determinant of its future price performance.
When comparing the current values of a company’s valuation multiples, such as price-to-earnings ratio (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values help determine whether the stock is fairly valued, overvalued or undervalued. Comparing the company with its peers based on these parameters gives a good idea of the reasonableness of the share price.
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups, ranging from A to F (A is better than B; B is better than C; and so on). ), making it useful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.
Upland Software has an A rating in this area, which indicates that the company is trading at a discount to its peers. Click here to view the values of some of the valuation data that led to this figure.
The facts discussed here and much other information found on Zacks.com can help determine whether or not it is worth paying attention to the market buzz surrounding Upland Software. However, its Zacks Rank #1 suggests it will outperform the broader market in the near term.
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