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.
Over the past month, shares of this maker of cloud-based business work management software have risen +21.4%, compared to the Zacks S&P 500 composite’s +0.4%. During this time, the Zacks Internet Software industry, which includes Upland Software, is up 1.9%. The key question now is: what could be the future direction of the stock?
Although press releases or rumors about a substantial change in a company’s business prospects typically make the stock “trending” and lead to an immediate price change, there are always some fundamental facts that ultimately dominate the buy-and-hold decision making.
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.
Essentially, we’re looking at how the sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And when earnings expectations for a company rise, the fair value of its shares also rises. A higher fair value than the current market price stimulates investor interest in purchasing the stock, causing the price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
For the current quarter, Upland Software is expected to post earnings of $0.24 per share, marking a change of +71.4% from the prior year quarter. The Zacks Consensus Estimate remained unchanged over the past 30 days.
The consensus earnings estimate of $1.04 for the current fiscal year indicates a year-over-year change of +7.2%. This estimate has remained unchanged 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. The estimate has remained unchanged over the past month.
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 a company’s earnings growth may be the best indicator of its financial health, not much will happen if it can’t grow its revenue. It is almost impossible for a company to grow its profits without growing its sales over long periods of time. That’s why it’s crucial 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 is rated A in this area, indicating 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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