Procore (NYSE: PCOR) - American manufacturer of software for the construction industry. The company's business has good growth prospects, but its abnormal price and unprofitableness make these stocks an extremely risky investment.
When creating the material, sources were used, inaccessible to users from the Russian Federation. Hopefully, you know, what to do.
What do they make money on
The company appeared on the stock exchange quite recently: IPO took place 19 May this year. So the main source of information about the business for us will be the Procore registration brochure.. However, there are no details about the sales structure.
Procore is a cloud-based construction management software. How it looks, can be viewed in the demo video company, especially the curious can watch all the videos on the Procore channel. You can say, what is Wrike for builders.
The company has five categories of software products:
- Preliminary work. Planning, budgeting, participation in tenders, evaluation of works and selection of partners.
- Project management. Reflection of the activity of the main participants in the construction project in the virtual sphere: progress, adjustments, problems and stuff.
- Resource management. Software for assessing project profitability and labor productivity.
- Financial management. Software for monitoring the financial side of construction work.
- Company analytics. Software for trend analytics of user's construction projects.
The company receives money by subscription.
By country, revenue is distributed as follows: USA give 87,8% company revenue, but 12,2% falls on other countries. The exact share of each country is not known, but it is known, what is this Canada, Mexico, England, New Zealand, Singapore and UAE.
The company is unprofitable.
Arguments in favor of the company
It's time, brother, it's time. American homebuilders have reached a definite dead end in development: real estate prices in the USA are very high, which provides a high business margin, but the deficit of everything, including workers, and logistical difficulties prevent them from taking advantage of this. Therefore, one can expect, that construction companies will start to invest more in IT initiatives, to increase productivity.
The American construction sector is characterized by extremely low productivity growth - construction companies have a lot of work ahead to fix this shortcoming.. So the long-term business environment for Procore seems to be positive..
It seems that there is room to grow. On the platform, the companies are working on projects with a total value of over $ 1 trillion - and in total, construction projects in the world are worth $ 12 trillion every year.. So the company still has room to grow.
maybe, buy. Given the trend towards consolidation in the construction industry and the dominance of large players there, the possibility is not excluded, that Procore will buy one of them. However, there is a nuance here.
What can get in the way
Unprofitableness. Losing stocks are a priori volatile, and there is always a threat of bankruptcy nearby.
Evaluation. Procore itself estimates the size of its target market in the region of $ 12.4 billion per year.. Procore currently occupies 3,7% your target market, but at the same time it costs 11.54 billion - that is, the company costs about the same as its entire target market. This already leads to a strong correction of these stocks.. Still, such a price will scare away potential buyers of this business..
Unprofitable-2. The American market has become too expensive compared to other countries' exchanges. And although I doubt, that there will be a large-scale general correction, objectively overvalued and unprofitable companies like Procore will be the most vulnerable. Especially now, when everyone is preparing for an increase in interest rates and an increase in the cost of loans.
Customers are not so happy. Procore's revenue retention rate is 94%. These are normal indicators for the company., operating on a subscription model. But in general, this suggests that, that Procore can't squeeze enough money out of its existing user base, to offset the churn of subscribers. The company has many competitors, and their presence does not allow us to hope for that, that in the foreseeable future Procore will be able to reduce the cost of attracting customers. AND, again, this moment will reduce the attractiveness of the company in the eyes of a potential buyer.
Like SentinelOne, Procore is an interesting solution in a promising area, but the monstrous high cost of the company, coupled with unprofitability, makes it an extremely dubious investment at current prices.
If the company cost four times cheaper, then it could be considered a promising investment. But now it costs too much - and, at the same time, it is undeservedly expensive.. So you can invest in Procore only at your own peril and risk., I would prefer to wait for the correction of these shares and think about investing in a company with a share price in the area 40 $.