San Francisco-based Anaplan, Inc. (PLAN) provides a cloud-based connected planning platform to connect organizations and people. Shares of PLAN tumbled almost 20% in price on November 24, despite the company reporting better-than-expected quarterly sales. Furthermore, PLAN has declined 34.1% in price over the past month and 22.8% over the past five days to close its last trading session at $43.12. The stock is currently trading below its 50-day and 200-day moving averages and near its 52-week low of $40.13.

For its fiscal third quarter, ended October 31, PLAN’s revenues increased 35.2% year-over-year to $155.35 million, topping consensus estimates by 6.2%. The company also raised its revenue guidance for the fiscal year. The company now expects its total revenues to be in the range of $583.5 to $584.5 million. However, the main reason for the share-price decline is the company’s heavy losses. Its non-GAAP net loss came in at $7.31 million, while its non-GAAP loss per share was $0.05. Moreover, investors are concerned about PLAN’s sluggish growth in billings.

PLAN has been investing in advancements to gain a competitive edge. It recently introduced its next-generation Anaplan Polaris™ Calculation Engine to help businesses model, analyze, and solve the global complexities impacting their performance and operations more effectively. Also, PLAN and Amazon Web Services, Inc (AWS) have collaborated to combine market-leading innovation with powerful planning intelligence and deliver innovation and more robust solutions in the market. These strategic plays should support PLAN’s long-term growth.

Click here to check out our Cloud Computing Industry Report for 2021

Here is what could shape PLAN’s performance in the near term:

Stretched Valuation

In terms of forward EV/Sales, PLAN is currently trading at 10.32x, which is 151.4% higher than the 4.10x industry average. Also, its 10.79 forward Price/Sales ratio  is 165.2% higher than the 4.07 industry average. PLAN’s 25.38x forward Price/Book is 325% higher than the 5.97x industry average. In addition, the stock’s 5.08.71x trailing-12-months Price/Cash Flow is 2,149.5% higher than the industry average.

Mixed Profitability

PLAN’s 74.53% gross profit margin is 50.3% higher than the 49.57% industry average. Also, its 27.59% levered FCF margin is 130.7% higher than the 11.96% industry average.

However, PLAN’s ROE, ROA, and ROTC of negative 68.48%, 24.47%, and 37.06%, respectively, compare with the8.20%, 3.57%, and 4.93% industry averages.

Mixed Analysts Estimates

Analysts expect PLAN’s revenues to increase 26.1% in the current quarter and 30.1% in the current year. Also, its revenue is expected to grow 24.9% year-over-year to $727.39 million in the following year. The company’s EPS is expected to decline 42.9% in the current quarter and 29.6% in the current year. Also, the Street expects its EPS to remain negative at least until the next year. However, its EPS is expected to grow 34.3% in the next year.

POWR Ratings Reflect Uncertain Prospects

PLAN has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a D grade for Value, which is consistent with its stretched valuation.

PLAN has a C grade for Sentiment. Mixed analyst sentiment about the stock justifies this grade.

Of the 77 stocks in the Internet industry, PLAN is ranked #37.

Beyond what I have stated above, one can also view PLAN’s grades for Quality, Growth, Momentum, and Stability here.

View the top-rated stocks in the Internet industry here.

Bottom Line

PLAN shares tumbled on concerns over the company’s weak bottom line and its sluggish growth in billings. Even though the company has introduced innovative solutions and engaged in strategic collaborations to drive growth, it could take a while to reverse its losses. Furthermore, the company looks overvalued at its current price level. Also, its 1.88 beta indicates high volatility. Thus, we think it could be wise to wait for the stock’s prospects to stabilize before investing in it.

How Does Anaplan, Inc. (PLAN) Stack Up Against its Peers?

While PLAN has an overall POWR Rating of C, one might want to consider looking at its industry peer Travelzoo (TZOO), which has an A (Strong Buy) rating.

PLAN shares were trading at $43.50 per share on Monday afternoon, up $0.38 (+0.88%). Year-to-date, PLAN has declined -39.46%, versus a 25.77% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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