Assessing SPS Commerce (SPSC) Valuation After Steep Share Price Declines And Growth Reassessment

Event context and recent share performance

SPS Commerce (SPSC) has drawn investor attention after a stretch of weaker share performance, with the stock down about 4% over the past week and 31% over the past month.

That short term pressure sits alongside a 58% decline over the past year and a 59% total return drop over the past 3 months, prompting closer scrutiny of the company’s fundamentals and valuation.

See our latest analysis for SPS Commerce.

At a share price of US$61.92, SPS Commerce’s recent 30 day share price return of 31.25% decline and 1 year total shareholder return of 57.65% decline suggest fading momentum as investors reassess growth expectations and risk around the business.

If you are reassessing your software exposure after this pullback, it could be a good time to broaden your search and check out 23 top founder-led companies as potential new ideas.

So with SPS Commerce trading at an apparent discount to some analyst targets and an estimated intrinsic value, yet coming off steep recent declines, is this weakness a fresh buying opportunity, or is the market already pricing in its future growth?

Most Popular Narrative: 38% Undervalued

With SPS Commerce last closing at $61.92 and the most widely followed narrative pointing to fair value around $99.82, there is a clear gap that hinges on how future growth and margins play out.

The accelerating digitalization of retail supply chains and rising compliance requirements are driving robust demand for SPS Commerce's cloud-based EDI and supply chain solutions, supporting sustained growth in new customer adds and recurring revenue.

As the complexity of omni-channel retail and need for real-time, integrated supply chain analytics increases, SPS Commerce is well positioned to expand its average revenue per user (ARPU) through expanded network connections and the cross-selling of high-value products like analytics and revenue recovery solutions.

Read the complete narrative.

Curious how that demand story translates into a near three digit fair value per share? The narrative leans heavily on recurring revenue, margin progression and a rich future earnings multiple. If you want to see exactly which growth and profitability assumptions sit underneath that $99.82 number, the full narrative lays it all out in plain terms.

Result: Fair Value of $99.82 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this optimistic fair value still relies on SPS Commerce avoiding prolonged customer spending caution and successfully integrating deals like Carbon6 and SupplyPike without margin setbacks.

Find out about the key risks to this SPS Commerce narrative.

Build Your Own SPS Commerce Narrative

If you are not fully aligned with this view or prefer to lean on your own research, you can build a fresh SPS Commerce thesis. Start with Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding SPS Commerce.

Looking for more investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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