PagerDuty Stock To $15?

PagerDuty (PD) stock has fallen 23% during the past day, and is currently trading at $11.64. Our multi-factor assessment suggests that it may be time to buy more shares of PD stock. We have, overall, a positive view of the stock, and a price of $15 may not be out of reach. We believe there is a near-equal mix of good and bad in PD stock given its overall Moderate operating performance and financial condition. Considering stock’s Low valuation we think it is Attractive.

Below is our assessment:

Individual stocks can soar or tank but one thing matters: staying invested. High Quality Portfolio helps you do that.

Let’s get into details of each of the assessed factors but before that, for quick background: With $1.1 Bil in market cap, PagerDuty provides a digital operations management platform serving multiple industries, including technology, telecommunications, retail, travel, media, and financial services globally.

[1] Valuation Looks Low

This table highlights how PD is valued vs broader market. For more details see: PD Valuation Ratios

[2] Growth Is Moderate

• PagerDuty has seen its top line grow at an average rate of 14.3% over the last 3 years
• Its revenues have grown 8.2% from $447 Mil to $484 Mil in the last 12 months
• Also, its quarterly revenues grew 6.4% to $123 Mil in the most recent quarter from $116 Mil a year ago.

This table highlights how PD is growing vs broader market.

[3] Profitability Appears Very Weak

• PD last 12 month operating income was $-29 Mil representing operating margin of -5.9%
• With cash flow margin of 24.4%, it generated nearly $118 Mil in operating cash flow over this period
• For the same period, PD generated nearly $-12 Mil in net income, suggesting net margin of about -2.5%

This table highlights how PD profitability vs broader market.

[4] Financial Stability Looks Very Strong

• PD Debt was $408 Mil at the end of the most recent quarter, while its current Market Cap is $1.1 Bil. This implies Debt-to-Equity Ratio of 37.8%
• PD Cash (including cash equivalents) makes up $568 Mil of $892 Mil in total Assets. This yields a Cash-to-Assets Ratio of 63.7%

[5] Downturn Resilience Is Weak

PD has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• PD stock fell 65.4% from a high of $56.58 on 12 February 2021 to $19.58 on 9 November 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $34.98 on 2 April 2023 , and currently trades at $11.64

 
2020 Covid Pandemic

• PD stock fell 49.3% from a high of $25.38 on 22 January 2020 to $12.87 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 May 2020

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read PD Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.