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Why Coupa Software (COUP) is an Enticing Pick Post Q2 Earnings

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Shares of Coupa Software Incorporated have soared 20.2% post second-quarter fiscal 2023 earnings release that witnessed record revenues and healthy momentum in the subscription business. Both the top and the bottom lines beat the respective estimates. The results were backed by a solid portfolio of software solutions that provide companies with visibility and control over their business spending, resiliency in back-office operations and aid in making strategic and data-driven decisions to yield positive outcomes for their business.

Backed by robust order trends, the company expects this growth momentum to continue despite macroeconomic headwinds. Earnings estimates for the current fiscal for Coupa have increased 144.4% since May 2022, while that for the next fiscal have risen 29.1% since June this year, implying healthy inherent growth potential. With solid fundamentals, this Zacks Rank #2 (Buy) stock appears to be a promising investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Growth Drivers

Headquartered in San Mateo, CA, Coupa Software is one of the leading providers of Business Spend Management (BSM) solutions. The company is evolving its cloud-based platform on the back of continuous product innovations to offer customers increased spend visibility, aid in mitigating supply chain risk, and increase business agility to adapt to change in spending trends. The company's BSM platform unifies all business spend — from sourcing to contracts and invoicing to payments, thereby enabling enterprises to be more resilient and ultimately spend smarter.

Coupa Software is the pioneer of procure-to-pay solutions. The company’s procurement module aids customers to determine spend policies, streamline purchase requisition and purchase order processes. Businesses can track and manage purchases in real time and reduce time and cost with purchase orders being automatically sent to suppliers for fulfillment and invoicing.

The company boasts one of the highest adoption rates in the industry with its easy-to-use operations. It offers prescriptive recommendations, from saving opportunities to supplier insights, by leveraging collective AI across the entire Coupa Software platform for greater agility. Its unified cloud platform makes it faster to deploy, accelerating the time to deliver value to customers.

Average subscription revenue per new customer has increased steadily over the past few quarters, largely due to the expanded set of capabilities in its platform. Subscription revenues for second-quarter fiscal 2023 were record high at $192.7 million compared with $156.2 million in the year-ago quarter.

Solid momentum in Coupa Advantage Express, Strategic Sourcing, Risk Assess and Source Together solutions is anticipated to bolster the company’s subscription services revenues in the quarters ahead. Further, the company has been adding new capabilities to Coupa Supplier Insights and Coupa BSM solutions, which are anticipated to boost adoption.

The stock has a long-term earnings growth expectation of 22.6%. It delivered a stellar earnings surprise of 478.1%, on average, in the trailing four quarters and currently appears to be an enticing investment option in this volatile market.

Other Key Picks

TESSCO Technologies Incorporated (TESS - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 61.9%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 31% since September 2021.

TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.

Spirent Communications plc (SPMYY - Free Report) carries a Zacks Rank #2. Earnings estimates for the current year for the stock have moved up 10.8% since September 2021, while that for the next year is up 11.8%.

Founded in 1936 and headquartered in Crawley, the United Kingdom, Spirent offers a comprehensive, end-to-end solution that validates forwarding performance, latency and functional capabilities in an integrated approach that reduces the cost of ownership. It is a leading provider of Ethernet validation solutions in the market.

Harmonic Inc. (HLIT - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 79.3%, on average, in the trailing four quarters. Earnings estimates for Harmonic for the current year have moved up 12.9% since February 2022.

Harmonic provides video delivery software, products, system solutions and services worldwide. With more than three decades of experience, it has revolutionized cable access networking via the industry's first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit Internet service to consumers' homes and mobile devices.

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