Software companies are seeing significant expansion opportunities with the rising demand for cloud computing, Artificial Intelligence (AI), cybersecurity, and remote collaboration tools. The global market software revenue is projected to be $1.39 trillion by 2030, exhibiting a CAGR of 11.5%.
Furthermore, the global software as a service market is driven by the growing reliance on SaaS solutions that offer real-time threat intelligence and monitoring capabilities, rising demand for payment gateways and inventory management in the e-commerce sector, and increasing adoption of customer relationship management (CRM) solutions.
Against this backdrop, let’s compare two software stocks, UiPath Inc. (PATH) and C3.ai, Inc. (AI), and analyze which software stock offers more value.
The Case for UiPath Inc.
Valued at $8.22 billion by market cap, UiPath Inc. (PATH) is an AI software and enterprise automation company specializing in building and managing automation and computer vision technology. It offers customers capabilities to automate using a digital workforce, collaborating with humans, and operating mission-critical automation programs at scale.
On October 23, PATH announced the transformation of operations for Omega Healthcare, a global leader in revenue cycle management, healthcare, and clinical enablement services, through its AI-powered automation. The partnership could position PATH as a frontrunner in AI-driven automation.
On October 22, PATH announced a strategic partnership with Inflection AI, an enterprise AI company, to introduce the UiPath Platform with the new Inflection for Enterprise solution that would result in achieving higher operational efficiency and effectiveness for enterprises.
PATH could reinforce its commitment to secure and efficient AI-driven solutions through this partnership, positioning itself as a leader in innovative enterprise automation.
PATH’s stock has gained 8.6% over the past three months to close the last trading session at $14.95. Over the past month, the stock has surged 10.3%.
PATH’s forward P/B of 4.48x is 1.2% lower than the industry average of 4.54x. Its forward non-GAAP PEG multiple of 1.17 is 40.2% lower than the industry average of 1.96x.
For the fiscal third quarter that ended September 30, 2024, PATH’s revenue increased 20% year-over-year to $628 million. Its non-GAAP net income stood at $207 million and $0.41 per share, up 24% and 24.2% from the prior-year quarter, respectively.
Street expects PATH’s revenue for the fourth quarter (ending October 2024) to increase 6.7% year-over-year to $347.72 million. Its EPS for the current quarter is expected to be $0.07. Moreover, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
PATH’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
PATH has a B grade for Quality. It is ranked #11 out of 18 stocks in the A-rated Software - SAAS industry.
Click here for the additional POWR Ratings for PATH (Value, Growth, Sentiment, Stability, and Momentum).
The Case for C3.ai, Inc.
Valued at $4.76 billion by market cap, C3.ai, Inc. (AI) operates as an enterprise AI software company in North America, Europe, the Middle East, Africa, the Asia Pacific, and internationally.
AI’s stock has gained 46.4% over the past month to close the last trading session at $37.49.
AI’s forward EV/Sales of 10.50x is 224.8% higher than the industry average of 3.23x. Its forward P/S multiple of 12.48 is 279.5% higher than the industry average of 3.29x.
AI’s trailing-12-month CAPEX/Sales of 4.56% is 125.6% higher than the industry average of 2.02%. However, the stock’s trailing-12-month levered FCF margin of 1.26% is 88.8% lower than the industry average of 11.17%.
AI’s net revenue for the first quarter that ended September 30, 2024, gained 4% year-over-year to $1.02 million. The company’s net loss and net loss per share came in at $129 million and $0.71.
Analysts expect AI’s revenue for the second quarter (ended October 2024) to increase 24.3% year-over-year to $91.02 million. However, the company’s EPS for the same quarter is expected to decline 24.5% year-over-year to $0.16. AI surpassed the consensus EPS estimates in each of the trailing four quarters.
AI’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, translating to a Sell in our proprietary rating system.
The stock has a D grade for Value, Stability, and Quality. AI is ranked last in the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see AI’s ratings for Growth, Momentum, and Sentiment here.
UiPath (PATH) vs. C3.ai, Inc. (AI): Which Software Stock Offers More Value?
The new-age trend of integrating artificial intelligence and machine learning technologies with SaaS solutions is making the market take a giant leap, including enhancing operational efficiency and intelligence across several industrial domains. However, PATH’s higher profitability and strong financials favor it as the better software stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Software - SAAS industry here.
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PATH shares were trading at $14.65 per share on Friday afternoon, down $0.30 (-2.01%). Year-to-date, PATH has declined -41.02%, versus a 28.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
UiPath (PATH) vs. C3.Ai, Inc. (AI): Which Software Stock Offers More Value? StockNews.com
