Cathie Wood and her team at Ark Invest are often seen as some of the most forward-thinking investors. As a result, many people examine Ark's portfolio to find innovative ideas to add to their own holdings. While Ark's largest holding, Tesla (NASDAQ: TSLA), is somewhat predictable, its second-largest holding is not.

That stock is UiPath (PATH 0.26%) when all of Ark's exchange-traded funds are combined. With the investment making up just over 6% of the firm's resources, it's a significant bet. Should you follow Wood's lead and invest in UiPath? Let's find out.

AI and RPA go hand in hand

While we are learning about all of the uses of artificial intelligence (AI), there are more practical steps to automating processes that many companies should be focused on first. Robotic process automation (RPA) is one of those technologies, since it makes employees more efficient.

Repetitive tasks in the business world include things like filling out invoices and processing insurance claims. UiPath's services can be deployed to identify these repetitive tasks, record them, and automate the process. For example, scientific-instrument maker Thermo Fisher Scientific used UiPath's RPA to reduce the time needed to process invoices by 70%. This freed up its employees to do tasks that computers cannot, which improved efficiency.

That's not to say UiPath is disconnected from AI. The company is closely linked to the technology since it uses AI to perform more complex tasks. It describes the integration this way: "When conceptualizing RPA and AI, it can be helpful to think of AI as the brain, and RPA as the hands. It's when the two are combined that complex tasks can be completed."

AI and RPA have practically endless uses; a Japanese website, for example, was able to filter out offensive content from appearing in its trending keywords.

UiPath's products allow companies to deploy AI and modernize their systems, which is why Ark Invest is so excited about them. But the story is only one part of an investment case. How are its financials?

UiPath is positioned to take advantage of a growing opportunity

UiPath is a young software company, so investors can rightfully assume that it's growing quickly and unprofitably. Revenue rose 19% in the second quarter of its 2024 fiscal year (ending July 31) to $287 million, but the company also posted a $78 million operating loss.

UiPath is working toward profitability. Its operating margin drastically improved from a 50% loss last year to a 27% loss this year. This is a crucial trend that investors must pay attention to, and it looks like the company is heading in the right direction.

A significant portion of this improvement came from stabilizing stock-based compensation expenses. Last year, UiPath paid out $88 million in stock to its employees; this year, it was $102 million, a 16% increase. With that expense rising slower than revenue, it's a positive sign.

But UiPath will need to put up a lot more growth to break even under generally accepted accounting principles (GAAP). Fortunately for the company, it operates in an industry that is expected to expand at a remarkable rate. This year, the RPA market size is about $3.7 billion, and it's forecast to have an impressive 38% compound annual growth rate to reach $66 billion by 2032, according to Polaris Market Research. I want a piece of that industry, and fortunately, UiPath's stock isn't expensive at 8.1 times sales.

With that reasonable share price and an impressive investment story, it's no wonder that Cathie Wood and her Ark team are so high on the stock. I think UiPath is a great growth stock to add to your portfolio, but you must be patient, as RPA deployment is just getting started.