Are they on the right PATH?

Ever week I pride (and force) myself to get up to speed on at least one new name. Read the transcripts, the press releases and model out what I think are the important metrics and triggers to the story. Is it an open-ended story or one that has little controversy other than its valuation being too rich, too low or just right? If the task takes “hours”, then it is unlikely to be a name I can own or trade with a sense of edge. Why? Very complex stories with various outcomes (a biotech) and curve balls, often require an expertise in an industry and even that does not guarantee success. Also, the time sink for complicated or controversial stories diminishes your ability to see the easier to analyze market opportunities. That said, this week let’s discuss UiPath, ticker: PATH.

PATH makes software that allows businesses to automate repetitive tasks, thereby saving time and money (less bodies). Can you think of anything more valuable to a large enterprise than this? I can’t. The software makes suggestions and the customers decide if the automation makes sense to implement. Artificial Intelligence is making this business even more useful to more parts of companies by allowing generative AI (simple non code based queries) to take advantage of the vast library (examples) of processes that can be automated. Path is a $1.5 billion revenue company growing 18%, which frankly I wonder why they aren’t growing even quicker. Some believe the industry has matured, but with their new Auto-pilot product for enterprises (not to be confused with Co-Pilot by Microsoft, who is also a UiPath partner) it seems plausible the next leg of logo (new customer) and net retention growth (land and expand) could be ahead of the company. That is the trigger for me. Look at the model I built on net new ARR (which encompasses management guidance) and you can see the growth rate is likely to remain at 18-20% or so unless they can accelerate net new ARR.