Coupa Software Inc. (NASDAQ: COUP) is another cloud computing company that has undergone phenomenal share price growth in 2020.
For example, Mr. Market paid $153.57 for Coupa on 2 January 2020 and $338.91 for it on 31 December 2020. Hence, Coupa’s shares more than doubled in value in 2020.
Investors love Coupa (COUP) because it provides business spend management applications. To explain, Coupa makes software that manages a company’s spending and expenses.
How Coupa Software can Cash in on Coronavirus
Coupa Software (COUP) offers cloud-based solutions for accounts payable (AP), invoicing, expense management, travel management, and travel and expense management. More organizations are using cloud-based spend management solutions because of coronavirus.
A company still needs to pay invoices, even when all of its AP people are working from home. Coupa’s business spend management (BSM) platform can allow employees to review and pay invoices and expense reports from home. To elaborate, remote-working AP employees can log into the Coupa BSM platform and work from anywhere if they have a computer and decent internet.
The same employees can use the Coupa BSM platform to make supplier and expense payments from home. Thus, the accounts payable department can stay in operation and pay the organization’s bills with the office closed.
I think Coupa’s share values keep rising because coronavirus does not seem to end. The pandemic is almost a year old, and it could get worse despite vaccines. They recorded 107,120 new coroanvirus cases in the United States on 29 December 2020, Worldometers estimates.
Given those numbers, I predict work-from-home will continue and demand for Coupa’s products will grow. Furthermore, work-from-home is becoming the new normal for office workers, another development that benefits cloud software providers such as Coupa.
Is Coupa Making Money?
Coupa Software is still losing money despite the pandemic. For instance, Coupa reported a quarterly operating loss of -$33.65 million on 31 October 2020.
The quarterly operating loss grew from -$31.92 million on 31 July 2020 and -$15.87 million on 31 January 2020. However, Coupa reported an $82.18 million quarterly gross profit on 31 October 2020. The quarterly gross profit grew from $71.35 million on 31 January 2020.
I think Coupa (COUP) is a poor stock because of its small revenues. For instance, Coupa Software quarterly revenues of $132.96 million on 31 October 2020 and $111.45 million on 31 January 2020.
However, Coupa experiences healthy revenue growth. Stockrow estimates Coupa’s revenues grew at a rate of 30.63% in the quarter ending on 31 October 2020.
Those revenues grew at a rate of 32.35% in the quarter ending on 31 July 2020 and 46.56% in the quarter ending on 30 April 2020. Plus, Coupa began 2020 with a revenue growth rate of 48.79% in the quarter ending on 31 January 2020.
How Much Cash Does Coupa Software Generate?
Coupa (NASDAQ: COUP) has some cash. The company reported a quarterly operating cash flow of $19 million on 31 October 2020. The quarterly operating cash flow fell from $22.28 million on 31 January 2020.
Coupa Software reported a quarterly ending cash flow of $348 million on 31 October 2020. The quarterly ending cash flow fell from $609.84 million on 31 July 2020 and rose from -$318.87 million on 31 January 2020.
Unfortunately, Coupa seems to have borrowed most of that ending cash flow. In fact, Coupa reported a quarterly financing cash flow of $701.42 million on 31 July 2020. The financing flow shows how much money Coupa Software accumulated through borrowing and debt.
What Value Does Coupa Software Have?
Conversely, Coupa keeps enormous amounts of cash. Coupa Software (NASDAQ: COUP) had $1.354 billion in cash and short-term investments on 31 October 2020. In 2020, cash and short-term investment rose from $767.21 million on 31 January 2020.
However, as I noted above, most of the cash and short-term investments came from financing. Thus, I cannot tell how much money Coupa’s business generates.
Coupa had a little value in the form of $2.298 billion on 31 October 2020. In 2020, Coupa’s total grew from $1.594 billion on 31 January 2020.
Mr. Market Market Overvalues Coupa Software
I think Mr. Market enormously overvalued Coupa at $338.91 on 31 December 2020. I do not think any company with total assets of only $2.298 billion can be worth $338.91 a share.
Additionally, Coupa Software pays no dividend. Hence, I think there is no reason for ordinary people to buy Coupa Software.
Instead of Coupa Software, I recommend Oracle Inc. (NYSE: ORC). Oracle provides cloud-based financial software and it will pay a quarterly dividend of 24¢ on 21 January 2021. Yet Mr. Market paid $64.40 for Oracle Corp shares on 30 December 2020.
I believe smart investors need to avoid overpriced cloud software providers such as Coupa. Not even coronavirus can help Coupa Software, and many of its peers make money.
Originally published at https://marketmadhouse.com on December 30, 2020.
