The stock of Blue Prism Group PLC (OTCPK:BPRMF, 30-year Financials) appears to be possible value trap, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $11.695 per share and the market cap of $1.1 billion, Blue Prism Group PLC stock is estimated to be possible value trap. GF Value for Blue Prism Group PLC is shown in the chart below.
The reason we think that Blue Prism Group PLC stock might be a value trap is because its Piotroski F-score is only 3, out of the total of 9. Such a low Piotroski F-score indicates the company is getting worse in multiple aspects in the areas of profitability, funding and efficiency. In this case, investors should look beyond the low valuation of the company and make sure it has no long-term risks. To learn more about how the Piotroski F-score measures the business trend of a company, please go here.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Blue Prism Group PLC has a cash-to-debt ratio of 43.62, which is better than 76% of the companies in Software industry. GuruFocus ranks the overall financial strength of Blue Prism Group PLC at 6 out of 10, which indicates that the financial strength of Blue Prism Group PLC is fair. This is the debt and cash of Blue Prism Group PLC over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Blue Prism Group PLC has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $179.8 million and loss of $1.161 a share. Its operating margin is -27.77%, which ranks worse than 84% of the companies in Software industry. Overall, the profitability of Blue Prism Group PLC is ranked 2 out of 10, which indicates poor profitability. This is the revenue and net income of Blue Prism Group PLC over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Blue Prism Group PLC’s 3-year average revenue growth rate is better than 96% of the companies in Software industry. Blue Prism Group PLC’s 3-year average EBITDA growth rate is -73.6%, which ranks in the bottom 10% of the companies in Software industry.
One can also evaluate a company’s profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Blue Prism Group PLC’s ROIC is -24.35 while its WACC came in at 5.73. The historical ROIC vs WACC comparison of Blue Prism Group PLC is shown below:
To conclude, The stock of Blue Prism Group PLC (OTCPK:BPRMF, 30-year Financials) is estimated to be possible value trap. The company's financial condition is fair and its profitability is poor. Its growth ranks in the bottom 10% of the companies in Software industry. To learn more about Blue Prism Group PLC stock, you can check out its 30-year Financials here.
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