As 2023 has dragged on, I've progressively rekindled my interest in UiPath (PATH 0.26%). It's been a tough run since the 2021 IPO, but the company itself has made steady progress in realigning its business with what investors are demanding in this challenging global economy: profitable growth.

A revamped management team is in place and demonstrating its ability to execute. But after a nearly 100% rally through the first 11 months of 2023, are shares a buy right now?

UiPath's outperformance in a not-so-great year for the cloud

UiPath has been steadily building a new head of steam but rocketed higher following the third-quarter fiscal 2024 update (for the three months ended in October 2023). Quarterly revenue and annualized recurring revenue (ARR, an important metric for a company that primarily generates subscription-based sales) both increased 24% year over year to $326 million and $1.38 billion, respectively.

The ARR growth rate was yet another slowdown from prior quarters (ARR grew 28% in the first quarter and 25% in the second quarter), but the latest quarter's results exceeded management's guidance provided this past summer. And more importantly, a big upgrade to the full-year expected ARR (for the period that will end in January 2024) was also provided. UiPath now expects ARR to come in at $1.45 billion to $1.455 billion, up as much as an additional 14% from the previous outlook for $1.273 billion to $1.278 billion in fiscal 2024 ARR.

Many cloud software companies have slowed significantly in 2023 as customers have looked for ways to conserve cash. UiPath hasn't been exempt. But it's been fairly steady as its platform for software-based robotic processes and AI has remained in high demand. After all, automation can help organizations save money too, and it is exactly the type of product sure to gain attention even in tough economic times.

And along the way, UiPath has made progress in breaking even on generally accepted accounting principles (GAAP) profitability; its GAAP net loss was $31.5 million in Q3, compared to a net loss of $57.7 million in the same quarter last year. Through the first nine months of fiscal 2024, adjusted operating income of $122 million. Add in the Q4 expectation for $78 million in adjusted operating income for a fiscal 2024 grand total of $200 million, and it's another financial metric increase from $188 million in adjusted operating income expected a few months ago.

Time to buy now?

In a further show of business maturity, UiPath also began repurchasing stock last quarter to offset dilution from employee stock-based compensation (SBC). $52.6 million was repurchased, leaving most of the $500 million buyback authorization remaining. SBC was $283 million so far this year (about flat from last year), so there's still plenty of room for improvement here as UiPath boosts its profit margins.

Management is buying stock, but is it a buy for everyday investors? There is a high premium on UiPath. Shares currently trade for nearly 57 times trailing-12-month free cash flow after the most recent rally.

While it's too soon to say what UiPath's trajectory will be in fiscal 2025 (calendar year 2024), things look promising. UiPath could totally be back. However, as I've stated before, I believe this is a stock best purchased using a dollar-cost-average plan, building a larger position over time. That will help account for what's sure to be some wild swings in price, given the elevated valuation and uncertainty surrounding the long-term growth of this cloud-based AI software provider.

Nevertheless, UiPath still looks like a solid pick right now for long-term investors in the cloud software industry.