Should I buy Blue Prism shares after its recent slump?

The Blue Prism share price has slumped on a poor trading update. But the company should benefit from increasing technology adaptation, believes Rupert Hargreaves.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

University graduate student diploma piggy bank

Image source: Getty Images

The Blue Prism (LSE: PRSM) share price plunged by nearly a quarter this week. Shares in the robotic process automation software business slumped after publishing a lacklustre trading update, which clearly failed to impress the market. 

However, I think this might be a buying opportunity for savvy long-term investors. 

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Growth market

To explain why I’m so optimistic about the outlook for this business, I want to start with the outlook for the technology sector

The coronavirus pandemic has revolutionised how we interact with technology. Some analysts have suggested the pandemic has accelerated the adoption of certain technologies by as much as 10 years. I don’t think that’s an overstatement.

In some areas such as retail and corporate management, technological solutions have dramatically altered the state of the market, pushing down costs and compressing the time it takes to complete a project. 

The latter is Blue Prism’s speciality. The company’s primary products are focused on intelligent automation. It claims these tools can help clients improve return on investment and customer retention. These are becoming increasingly important as businesses fight to attract and retain customers in the digital world. 

And it certainly looks to me as if clients love the products Blue Prism offers. During its financial year to the end of October 2020, revenues increased by 46% year-on-year to £141.4m. Losses also reduced substantially. The group’s adjusted EBITDA loss fell to £40.3m from a loss of £76.1m in the period to 31 October 2019. 

Blue Prism share price on offer

Based on these positive figures, investors might have expected the Blue Prism share price to have jumped. Unfortunately, there was also a nasty revelation in the update. The company has had to restate some of its financials. This means the loss was larger than expected last year and revenues were around £5m lower after the restatement. 

This was a bad mark against the company. But I’m happy to give the business the benefit of the doubt here. The restatement wasn’t significant in the grand scheme of things. In my opinion, the group’s growth rate is far more critical. And that’s why I’m taking a closer look at the Blue Prism share price after its recent slump.

The company is one of London’s few technology champions, and one of the only ways for UK investors to get in on the rapidly growing enterprise software market. As I noted above, I think the outlook for this market is extremely positive. I believe companies with exposure to the sector are likely to generate large total returns for investors in the years ahead. 

As such, I’d buy the Blue Prism share price after its recent slump as part of a diversified portfolio of enterprise software stocks. I believe by gaining as much exposure to the sector as possible, I can maximise my returns and minimise potential losses in the post-Covid world.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Tabletop model of a bear sat on desk in front of monitors showing stock charts
Investing Articles

3 reasons why the stock market is falling today

Jon Smith explains several factors that are contributing to the stock market falling today, and his thoughts on them.

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

2 stocks that are great long-term picks

As recession fears weigh on share prices, our author has found two stocks with strong long-term prospects. He’s looking at…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

2 lesser-known penny stocks to buy now and hold for 10 years!

I’m currently looking at penny stocks that could help my portfolio grow over the next 10 years. Despite recent volatility,…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

Here’s 1 of the best stocks to buy for passive income

Jabran Khan delves deeper into one of the best stocks to buy for passive income, which is a FTSE 100…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

IAG shares are down 15% amid travel chaos! Is now the time to buy?

IAG shares have collapsed over the past month. Shareholders had hoped for a strong Q2. But maybe this represents a…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

UK shares: 1 dividend stock I own to combat inflation

This Fool is looking for quality UK shares to combat inflation through consistent and stable returns as well as growth…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how I’m investing as stock market volatility soars!

2022 has seen an explosion in stock market volatility. But with the right approach I think ongoing choppiness could turbocharge…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

2 top FTSE 100 shares to buy before a new bull market

On my search for FTSE 100 shares to buy before the recovery, I have found two growth options that could…

Read more »