Investors are betting big on robotic process automation technology with many seeing UK developer Blue Prism (PRSM:AIM) as a relatively cheap way to play this emerging trend. Shares in the Warrington-based company jumped 3.5% on Thursday to £12.59 after its US-based rival UiPath successfully listed in New York.
UiPath, which counts Amazon, EY and Bank of America as customers, priced its IPO (initial public offering) at $56 per share versus expectations of $52 to $54 on Monday (and $43 to $50 last week). The stock leapt 23% on the first day of trading to $69, and a further 3% after-hours to $71.25, giving the company a $36.9 billion market cap.
DIGITAL ARMY FOR DREARY TASKS
Robotic process automation, RPA for short, uses a virtual taskforce to automate manual back-office administration. This cuts costs for clients, frees the human workforce to do more value-added tasks, improves customer service and speed, and reduces the need to invest in new IT systems, all via a compliance-friendly platform.
The RPA market is predicted to see enormous growth in future. It was estimated to be worth around $1.9 billion in 2019 but a report earlier this by Global Market Insights predicted it to surge beyond $23 billion by 2026.
UiPath, Britain’s Blue Prism and Automation Anywhere, another US company, are the three major specialist players in the space. For the year to January 2021, UiPath grew revenues and annual recurring revenues by 81% to $608 million and 65% to $580 million respectively, according to analysts at Megabuyte.
While it remains loss-making, that is changing fast. Last year the company saw adjusted operating losses slashed to $21.5 million, versus $379 million the year before.
VAST VALUATION GAP
Key for Blue Prism investors is the yawning gap that has opened up in relative valuations. UiPath is valuation is equal to 58-times trailing enterprise to sales, while Blue Prism trades on a 7.4 equivalent multiple, based on its rough £1.2 billion market cap less cash.
‘It is true that UiPath is over three-times larger than Blue Prism, is growing faster and is closer to profitability,’ said Megabuyte’s Philip Carse.
Forecasts are not available for UiPath but for the current year Blue Prism is expected to report an adjusted operating loss of £35 million on £176 million revenues, up 24%.
‘Time will tell whether these differences justify such a large valuation gap,’ said Carse.