UiPath (PATH 0.09%) has attracted interest with its ability to apply robotics process automation (RPA). The technology applies robotics to enable entities to perform repetitive tasks and processes more efficiently.

However, an ill-timed initial public offering (IPO) and a technology bear market have driven its revenue growth and stock price downward. Amid that downturn, can UiPath maintain its value proposition to customers and investors, or do its challenges make it too risky? Let's take a closer look at the software-as-a-service (SaaS) stock to find out.

Why investors might consider UiPath

Admittedly, UiPath's software may not sound special at first glance. Its main purpose, the automation of repetitive tasks, has long served as a means for implementing software.

Nonetheless, it stands out by offering an end-to-end platform, combining robotics with a suite of capabilities that seamlessly connect UiPath's software with major enterprise products and applications through open application programming interfaces, or APIs.

It has also built a UiPath community. This consists of millions of automation professionals that develop and share applications. Such a network might make it difficult for a peer to compete fully with the company.

Demand for its services surged during the pandemic. As a result, the company's revenue climbed 47% in fiscal 2022. Additionally, the dollar-based net retention was 145%, meaning the average existing customer spent 45% more on the platform than in the previous year.

It likely attracted that added business by saving companies money. For example, Uber Technologies saves about $10 million annually through RPA, and other companies have increased efficiencies in a similar manner.

UiPath's challenges

However, by the company's own admission, the RPA market has become increasingly competitive. Although many of these peers lack an end-to-end platform or may not offer interoperability and openness, competition could cost it some business.

Moreover, like other tech companies, growth slowed as the lockdowns ended and customers returned to many of their pre-pandemic activities. In the first three quarters of 2023 (which ended Oct. 31), revenue of $750 million increased by 24%, significantly slowing the growth rate. Additionally, UiPath's fiscal fourth-quarter revenue outlook of $278 million probably disappointed investors, considering the company reported $290 million in revenue in the year-ago quarter.

Furthermore, the market has turned against money-losing companies. Due to continuing operating losses, UiPath lost $301 million in the first nine months of fiscal 2023. Even though losses fell from $462 million during the same period in fiscal 2022, that may not be enough to appease profit-focused investors.

UiPath also had the misfortune of launching its IPO in April 2021, near the peak of the 2020-2021 bull market. Consequently, it has dropped by more than three-fourths since debuting at a $56-per-share IPO price. And although the current price-to-sales (P/S) ratio of 8 is well below the 2021 peak, it serves as a reminder of the continuing losses.

PATH PS Ratio Chart

PATH PS Ratio data by YCharts

Should I buy UiPath?

In the end, the decision to buy depends on the individual investor. Considering the losses, risk-averse investors should probably avoid the stock.

Nonetheless, for those willing to take a risk, UiPath holds tremendous potential. The platform's end-to-end automation, interoperability, and the strength of its UiPath community should blunt competition. Furthermore, with its ability to save money and limit expense growth, the stock could 10x in 10 years or perhaps perform better as conditions improve. If it shows such improvement, it could finally experience the outsized growth UiPath bulls have predicted from the beginning.