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.
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.
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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.