Sprout Social Inc (SPT, Financial) has recently experienced a notable uptick in its stock performance, with a market capitalization now standing at $3.55 billion. The current price of the stock is $63.34, reflecting a significant 10.19% gain over the past week and an impressive 26.28% gain over the past three months. When compared to the GF Value of $99.63, up from the past GF Value of $99.02, Sprout Social is currently considered significantly undervalued, maintaining this status from the past valuation three months ago. This discrepancy between the current price and the GF Value suggests that the stock may have room to grow, presenting a potentially attractive opportunity for value investors.
Introduction to Sprout Social Inc
Sprout Social Inc, operating within the competitive software industry, specializes in developing comprehensive cloud software that integrates social messaging, data, and workflows. This system of record, intelligence, and action primarily generates revenue through software subscriptions. The company's innovative approach to unifying these elements has positioned it as a key player in its sector. 
Assessing Profitability
Despite its growth, Sprout Social's Profitability Rank stands at a modest 3 out of 10. The company's operating margin is currently at -20.73%, which, while not ideal, is better than 25.07% of 2,764 companies in the same industry. Its Return on Equity (ROE) is -40.47%, surpassing 17.22% of its peers, and the Return on Assets (ROA) is -18.14%, outperforming 22.24% of competitors. The Return on Invested Capital (ROIC) is at -32.07%, which is also better than 17.96% of similar companies. These figures indicate that while Sprout Social is not the most profitable in its sector, it does manage to outperform a significant portion of its competitors.
Growth Trajectory and Industry Ranking
Sprout Social's Growth Rank is more promising at 6 out of 10. The company has experienced a 3-Year Revenue Growth Rate per Share of -5.90%, which is better than 20.61% of 2,402 companies. However, the 5-Year Revenue Growth Rate per Share is much stronger at 26.10%, outperforming 88.52% of 1,890 companies. Looking ahead, the Total Revenue Growth Rate (Future 3Y To 5Y Est) is projected at 28.61%, which is higher than 93.49% of 507 companies. The 3-Year EPS without NRI Growth Rate is an impressive 64.90%, and the 5-Year EPS without NRI Growth Rate is 49.90%, both of which are better than over 93% of their respective comparison groups. These growth metrics suggest that Sprout Social has a robust growth profile, especially in the long term.
Investor Confidence and Shareholder Composition
Confidence in Sprout Social is further evidenced by the holdings of prominent investors. Baillie Gifford (Trades, Portfolio) holds a significant 4,404,402 shares, accounting for 7.87% of the company's shares. Ron Baron (Trades, Portfolio) follows with 775,000 shares, representing 1.38%, and Chuck Royce (Trades, Portfolio) holds 71,000 shares, making up 0.13%. The presence of these reputable investors indicates a level of confidence in the company's future prospects and stability.
Competitive Landscape
When compared to its closest competitors, Sprout Social stands out with its market cap of $3.55 billion. Intapp Inc (INTA, Financial) has a market cap of $2.74 billion, RingCentral Inc (RNG, Financial) is valued at $3.18 billion, and Global Business Travel Group Inc (GBTG, Financial) comes in at $2.87 billion. Sprout Social's market cap suggests that it is performing well within its competitive set, holding a leading position in terms of valuation.
Conclusion: Sprout Social's Market Position and Outlook
In conclusion, Sprout Social Inc's recent stock performance and valuation indicate a company that is significantly undervalued relative to its intrinsic value. While its profitability metrics may not be the strongest, the company's growth rates and the confidence shown by major shareholders suggest a positive outlook. Additionally, when compared to its competitors, Sprout Social holds a strong market position. For value investors, the current valuation presents an attractive entry point, with the potential for future growth as the company continues to expand its offerings and market presence.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
