Could this be the news UiPath shareholders have been waiting for?

UiPath (WAY -1.68%) shareholders did not have a great 2024. While the rest of the market rose, the software company’s shares fell by about 50%. However, despite the wave of bad news that has hit the company, it still appears to be a strong business.

Often all a stock needs is a glimmer of hope to start a rally. UiPath investors recently received one, but will it be enough to spark such a comeback?

UiPath software has many applications

UiPath provides Robotic Process Automation (RPA) software to its customers. Businesses today are looking to generative AI technologies to help them improve their productivity, and RPA fits perfectly with that, allowing users to automate repetitive tasks. This frees people up to do work that requires original thinking.

The biggest hurdle that UiPath can face is integrating with the various software packages that a company uses, but one type is commonly found among all businesses: Microsoft Office. UiPath is a preferred Microsoft partner, and its software integrates with all Office products and generative AI Copilot.

UiPath ticks a lot of boxes for investors in terms of its business model — the problem was its execution.

A bad quarter can hurt a stock for a long time

UiPath was a strong business heading into the first quarter of fiscal 2025, which ended on January 31. Revenue was growing at a 31% pace, and in the final quarter of fiscal 2024, it posted its first quarter of GAAP profitability. But that all came crashing down in the fiscal first quarter: Revenue growth slowed, management cut revenue guidance for fiscal 2025, GAAP losses resumed and its CEO left.

Traders responded by selling stocks, but the fiscal second quarter was a bit of a turnaround story. The founder and former CEO of UiPath, Daniel Dines, returned to his old role as CEO and steered the company in the right direction. In Q2, which ended July 31, UiPath’s revenue exceeded the upper end of the guidance range it had provided in Q1, and management raised its outlook for the full year, although it did not return to the levels indicated in the Q4 report of fiscal year 2024.

UiPath still posted a significant operating loss of 33%, which was much worse than the 15% loss it suffered in Q1. Investors shouldn’t read too much into this, however, as UiPath’s business hasn’t been entirely flat throughout the year; Its T2s have historically had lower revenue than its T1s, which reduces operating margin.

So, with solid management back at the helm and a rising revenue forecast, is the stock worth buying here? I would say yes. The RPA market opportunity was valued at just $3 billion in 2023. However, Grand View Research predicts it will grow to nearly $31 billion by 2030. Additionally, after the sales it has gone through, UiPath stock is very cheap

PATH PS Ratio data by YCharts.

Trading at just 5x sales and positioned for a turnaround, UiPath looks like a business worth buying now. However, I would not load the stock until the company starts to thrive again.