This was the year Zoom Video Communications (ZM 1.29%) stopped being a growth stock and became a value stock. Nearly 90% off of all-time highs, shares trade for just 17 times trailing-12-month free cash flow as of this writing. Zoom could be a best buy for 2023 for those investors looking for a deal.

But "value" is subjective. One investor's treasure is another's trash, and plenty of shareholders decided to toss out Zoom in the last year. As the bear market enters its second year, is it time to give this former software darling another look? 

Profits headed for another dip, but for how long?

Zoom is anticipating another rough quarter to close out its 2023 fiscal year (the 12 months that will end in January 2023). In the fourth quarter, revenue is expected to rise about 3% year over year, a pitiful increase compared to the double- and triple-digit growth for most of its life since its intial public offering in early 2019.

As has become clear, the massive individual and small-business subscriber base it racked up early in the pandemic has been gradually dwindling away, more than offsetting continued strong growth among big enterprises.

But it isn't just the pandemic that broke Zoom. The company, like so many other multinationals, has a U.S. dollar problem. As the Federal Reserve has aggressively hiked interest rates, the value of the dollar has skyrocketed, effectively lowering the value of an international sale. In the third quarter, Zoom's revenue growth was lowered from 7% down to 5% because of this effect. The same problem will crop up in the fourth quarter and into the new year.  

The strong dollar has more than just a negative impact on revenue growth. Like other U.S.-based software companies, Zoom spends most of its expense line items like research and development in dollars.

Thus, an overseas sale converted into a strengthening dollar, and then expensed in a dollar, serves to create an even more dramatic effect on profit margins. So Zoom has been struggling with declining earnings per share (EPS) this year.

On an adjusted basis, EPS was down 17% through the first nine months of this year to $3.15. Again, this effect is expected to persist at least through the fourth quarter before beginning to moderate next year (calendar year 2023, or Zoom's fiscal year 2024).  

How cheap is cheap enough?

Given the stubbornness of Zoom's small-subscriber problem and current economic headwinds, the stock deserves a cheap price tag. In fact, things could continue to deteriorate for the stock as investors seek out companies with more promising near-term outlooks.

But Zoom shouldn't be left for dead. Videoconferencing is here to stay and is still a growth industry, especially when it comes to big-business adoption.

It remains a top-ranked software company on researcher Gartner's Magic Quadrant for Unified Communications-as-a-Service (UCaaS) -- basically companies that provide software-based communications for large organizations.

Zoom is at a slight disadvantage compared to the sales and distribution capabilities of top tech giants Microsoft and Cisco Systems. RingCentral is also still hanging around and has been serving small businesses for many years.  

Zoom is nevertheless holding its own as it works through its pandemic-driven boom/bust cycle. It has nearly $5.2 billion in cash and short-term investments and no debt.

Zoom could still use some of this money to make a transformational acquisition -- like it attempted but failed to do with Five9 in 2021 -- to bolster its use as a tool for enterprises. Given the bludgeoning other UCaaS and related stocks have taken this year, now is an even more opportunistic time to go on the merger-and-acquisition hunt.

Management could also use some of this cash to repurchase stock, which it has already begun to do this year to offset dilution from employee stock-based compensation. Zoom repurchased $991 million worth of its stock in the first nine months of this year, effectively using up all of its free cash flow to offset $768 million in stock-based compensation.

With so much cash on balance, Zoom could make an acquisition and dip into its balance sheet a bit to repurchase even more stock if it chooses.  

In all, this is currently a stock with a lot of give and take. There's work to be done to get the growth story back on track, and profit margins are slinking in the wrong direction.

But on the positive side, Zoom operates in an industry (cloud-based communications) in the midst of a secular growth trend, it is still profitable, and it has a sizable war chest. Shares look like a very reasonable value to me in spite of the headwinds lingering into the new year. 

It isn't so cheap that I'll call it one of my best buys for 2023. But Zoom remains in my portfolio, and I'll be looking to add some more shares in anticipation of some (I hope) big moves from management with that cash next year.