May 30, 2024
Investment

Could Investing $20,000 in UiPath Make You a Millionaire?


Few stocks in the market have made investors a millionaire by themselves. But this task becomes easier when the initial amount invested is higher. To turn $20,000 into $1 million requires a 50-bagger — something few stocks have achieved.

But if you invest in a company early enough, it may be possible. So, could a smaller company like UiPath (PATH) be a candidate for such a return? Let’s find out.

UiPath’s robotic process automation software is incredibly useful

UiPath is a software company specializing in robotic process automation (RPA). RPA technology automates repetitive tasks, such as filling out a form or running a report. This cuts down on the mindless work employees must do, freeing them up to do tasks that require original thinking.

UiPath can also be considered an artificial intelligence (AI) investment. Its uses include communications mining, which sifts through internal and external communication to autofill information. UiPath can also monitor employees using AI to pinpoint processes that could be candidates for automation.

RPA is a useful software that improves employee efficiency, something management teams love. This has resonated with several companies, with nearly 2,000 clients spending over $100,000 annually with UiPath. There are also 264 clients spending $1 million annually, up from 201 last year. But is this a big enough market for UiPath to increase its size by 50 times?

The RPA market can support rapid growth for nearly a decade

Polaris Market Research estimated the global RPA market to be about $2.66 billion in 2022. However, it expects this market to increase at a compound annual growth rate (CAGR) of 37.9% to $66 billion by 2032.

That’s massive growth, and UiPath has already cornered a large chunk of the market. In Q3 of fiscal year 2024 (ending Oct. 31), UiPath’s annual recurring revenue was $1.38 billion (up 24% year over year). Although its growth is less than Polaris projected for the overall market, it shows that UiPath can keep up this growth rate for some time.

PATH Revenue (Quarterly YoY Growth) Chart

PATH Revenue (Quarterly YoY Growth) data by YCharts. YoY = year over year.

Should UiPath maintain its 24% growth rate through 2032, that would put its annual recurring revenue at $9.56 billion by 2032. That’s not unrealistic, as many other software companies have already achieved run rates above that range (e.g., Adobe). But does that produce the rate of return to make you a millionaire?

Fifty-bagger stocks are rare

Should UiPath grow to that revenue level and maintain its current stock valuation, it would rise 593%. That’s only almost a seven-bagger, well below the required rate of return to become a millionaire from UiPath stock. But if UiPath can deliver a 24% annualized return, it would nearly double the market and be an incredible performer in your portfolio, vastly outperforming the market.

So, what would it take for UiPath to turn $20,000 into $1 million? If we use its 24% growth rate, UiPath would have to grow at that rate for over 18 years, bringing its annual recurring revenue to $69 billion — a level that companies like Nvidia haven’t reached yet.

Buying a single stock and expecting it to turn into a 50-bagger isn’t easy. Few companies have the widescale reach to do it. However, if you can find companies that can grow much faster than the market’s standard pace, you will be well on your way to accelerating your path to becoming a millionaire.

UiPath is still a great stock pick — even if it likely won’t turn a $20,000 investment into $1 million.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *