Upland Software (NASDAQ:UPLD) recently made it onto Zacks.com’s list of Most Searched Stocks, therefore, it may be wise to consider some key factors that could impact this stock’s performance in the near future.
Over the past month, shares of this company, which makes cloud-based enterprise work management software, have returned -3.2% versus a +2% change for the Zacks S&P 500 Composite Index. During that same period, the Zacks Internet – Software industry, which Upland Software belongs to, has fallen 1.9%.The big question here is, what is the direction of this stock going forward?
While media reports or rumors of major changes in a company’s business prospects usually influence the movement of that company’s share price, leading to immediate price movements, there are always certain fundamental factors that ultimately drive a buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company’s future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
It essentially looks at how sell-side analysts covering the stock are revising their earnings forecasts to reflect the impact of the latest business trends. As a company’s earnings forecasts rise, so does the fair value of its stock. If the fair value is higher than the current market price, investors will be interested in buying the stock, driving the share price up. This is why empirical studies have shown a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Upland Software is expected to post earnings of $0.15 per share, which would represent a -31.8% change from the year-ago period. The Zacks Consensus Estimate has remained unchanged within the past 30 days.
The consensus earnings estimate for the current fiscal year is $0.65, indicating a change of -33% year-over-year. This estimate has not changed in the past 30 days.
Looking at the next fiscal year, the consensus revenue estimate is $0.69, which represents a +6.2% change from what Upland Software was expected to report a year ago, with estimates unchanged over the past month.
The Zacks Rank, our proprietary stock rating tool with a strong outside-audited track record, effectively harnesses the power of earnings estimate revisions to provide a more certainty view into near-term stock price direction. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, have earned Upland Software a Zacks Rank #3 (Hold).
The chart below shows the evolution of the company’s consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
Revenue growth is arguably the best indicator of a company’s financial health, but if a company can’t grow its revenue, then nothing happens. After all, it’s nearly impossible for a company to grow its revenue over the long term without growing its revenue. Therefore, it’s important to know a company’s revenue growth potential.
For Upland Software, the revenue consensus estimate for the current quarter is $67.91 Million, indicating a change of -8.9% year-over-year, while estimates for the current and next fiscal years are $274.61 Million and $268.47 Million, indicating changes of -7.8% and -2.2%, respectively.
Last reported results and surprise history
Upland Software reported revenue of $70.74 million in the most recent quarter, down -8.2% compared to the same period last year. EPS for the same period was $0.19, up compared to $0.28 in the same period last year.
Compared to the Zacks Consensus Estimate of $68.29 million, reported revenues represented a surprise of +3.58%. EPS surprise was +35.71%.
Over the last four quarters, Upland Software has surpassed EPS estimates two times, and the company has topped consensus revenue estimates each time during that period.
evaluation
No investment decision can be efficient without taking into account stock valuation. To predict the future price movement of a stock, it is important to determine whether the current price properly reflects the intrinsic value of the underlying business and the company’s growth prospects.
Comparing the current value of a company’s valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of how reasonably priced its stock is.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation criteria to rate stocks from A to F (with An being better than B, B being better than C, etc.), which can be very helpful in identifying whether stocks are overvalued, fairly valued or temporarily undervalued.
Upland Software has an A rating in this regard, indicating that it is trading at a discount relative to its industry peers.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding Upland Software is worth following, although its Zacks Rank #3 suggests it may be capable of performing in line with the overall market in the near term.
To read this article on Zacks.com click here.
