If you invest in individual stocks, chances are you’re trying to beat the market (often measured by the S&P500‘s annual return of approximately 10%). Otherwise, you’ll be putting a lot of effort into a practice that could easily be achieved by purchasing an index fund.
It’s not easy to identify stocks that have the potential to double faster than the market, but it can be done. One that I have found will outperform the S&P 500 UiPath (NYSE: PAD). Based on current growth rates and market trends, I believe UiPath can double in four years, much faster than the S&P 500’s typical seven years.
UiPath’s primary market is growing rapidly
UiPath is a provider of robotic process automation (RPA) software. This allows users to automate repetitive tasks, allowing them to focus on work that requires original thinking. This has two effects. First, it improves employee productivity. Second, it improves morale because employees don’t have to mindlessly click through the same series of actions to create a report.
UiPath also offers artificial intelligence (AI) add-ons, which expand the number of tasks it can automate by using AI to extract information from communications and internal data.
This is a fast-growing industry, and Grand View Research predicts that global RPA capabilities will grow nearly 40% annually, from $2.94 billion in 2023 to $31 billion in 2030. That’s a huge expansion, and UiPath is benefiting from it already from now.
In the fourth quarter of fiscal 2024 (ended January 31), UiPath’s annual recurring revenue (ARR) increased 22% year-over-year to $1.46 billion. A quick comparison between Grand View Research’s current industry size estimates and UiPath’s revenue shows that the company already has a substantial share of this market, which is an important point for investors.
For fiscal year 2025, UiPath expects ARR of approximately $1.73 billion, indicating growth of 19%. If UiPath can maintain this 19% growth rate for four years, its revenue will double.
However, just because a stock doubles its sales doesn’t necessarily mean its share price will double.
Stock performance will follow business growth
To determine whether a double turnover can result in a stock doubling, you also need to consider a stock’s valuation. Sometimes stocks trade at such high premiums that if a company doesn’t double its revenue, it would be disappointing and the stock would be sold. Nvidia is a good example of a stock with these high expectations.
Since UiPath is just starting to become profitable, I will use the price-to-sales ratio to assess its valuation.
Unlike many software stocks, UiPath isn’t trading at an ultra-high valuation: 8.1 times revenue could be considered cheap for a software stack. Compared to more mature software companies such as Adobe (11 times turnover) or even Microsoft (13 times revenue), UiPath is much cheaper.
Should UiPath achieve a 25% profit margin, it would trade for about 32 times earnings – a typical valuation for a software stock.
All of this analysis suggests that UiPath is now reasonably priced, so any stock rise will be tied to the company’s bottom line. Should UiPath double its revenue, its stock price will likely follow suit due to its low valuation starting point.
I am confident that UiPath stock will double over the next four years if it can maintain its growth rate. I think the RPA market still has a lot of growth ahead of it, and UiPath will benefit from this increase. If you’re looking for a stock that could crush the market over the next four years, UiPath is a perfect candidate.
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Keithen Drury holds positions at Adobe and UiPath. The Motley Fool holds positions in and recommends Adobe, Microsoft, and UiPath. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Prediction: UiPath Shares Will Double Within Four Years Originally published by The Motley Fool
