Is Sprout Social Inc (SPT) Set to Underperform? Analyzing the Factors Limiting Growth
Long-established in the Software industry, Sprout Social Inc (NASDAQ:SPT) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 3.94%, juxtaposed with a three-month change of 9.25%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Sprout Social Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Financial strength rank: 7/10
Profitability rank: 3/10
Growth rank: 6/10
GF Value rank: 8/10
Momentum rank: 2/10
Based on the above method, GuruFocus assigned Sprout Social Inc the GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding Sprout Social Inc Business
Sprout Social Inc, with a market cap of $2.64 billion, develops a cloud software that brings together social messaging, data, and workflows in a unified system of record, intelligence, and action. The firm generates the majority of its revenue from software subscriptions, amounting to sales of $289.49 million. However, it operates with a margin of -18.79%, indicating a loss in its operations.
Profitability Breakdown
Sprout Social Inc's low Profitability rank of 3/10 can raise warning signals for potential investors. This low rank indicates that the company's profitability is weaker compared to other companies, which could impact its ability to generate returns on investment.
Next Steps
Considering the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While Sprout Social Inc has a strong presence in the software industry, its current financial and growth metrics suggest that it may struggle to maintain its historical performance.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
