Does Sprinklr’s Recent 10% Drop Signal Opportunity After Latest Earnings?

If you have been tracking Sprinklr’s stock, you have probably noticed some recent twists in its story. After a solid year, with the share price up 8.4% over the past twelve months, the mood has shifted a bit in recent weeks. Shares pulled back 1.5% in the last week and are down 3.4% over the past month, echoing a broader cooling in sentiment for software and customer experience companies. On a year-to-date basis, Sprinklr is off by 10.5%, which might raise your eyebrows. It could also mean that today’s price reflects a more attractive entry point for long-term investors, especially since the company has recently been riding some favorable industry tailwinds.

Much of the recent market movement seems driven by evolving perceptions of risk and return across the cloud sector. Investors are actively weighing growth expectations against valuation, recalibrating after some red-hot years. For Sprinklr specifically, this has created a mood of cautious optimism. This is a situation that savvy investors can take advantage of if they know what to look for.

Here is where things get interesting on the valuation front. Sprinklr clocks a value score of 4 out of 6, based on widely used methods for assessing whether a stock is undervalued. That means the company is ticking most of the right boxes, but there is still some room to question where the price should go from here. Let’s dig into those valuation approaches next. Make sure to read on for a fresh angle on valuation that could reframe how you look at Sprinklr altogether.

Why Sprinklr is lagging behind its peers

Approach 1: Sprinklr Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a stock’s intrinsic value by projecting the company’s potential future cash flows and discounting them back to their present-day value. This approach helps investors gauge what the business is worth based on its ability to generate cash in the years ahead, rather than just its current earnings or assets.

According to the latest numbers, Sprinklr’s reported Free Cash Flow over the last twelve months is $112.8 Million. Analysts forecast this figure will grow steadily, reaching a projected $165.4 Million by 2028. Using a two-stage Free Cash Flow to Equity model, further estimates extend out over the next decade. These estimates factor in a series of modest annual increases provided by analysts and then continue using industry-standard extrapolation.

Running these projections through the DCF model yields an intrinsic value per share of $14.09. With the current share price sitting well below this valuation, the model signals Sprinklr is about 45.8% undervalued. This discount suggests a significant upside for investors who believe these cash flow estimates will be realized over time.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sprinklr.

Our Discounted Cash Flow (DCF) analysis suggests Sprinklr is undervalued by 45.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Sprinklr Price vs Earnings

The price-to-earnings (PE) ratio is often the go-to valuation metric for profitable companies because it directly links a company’s market value to its annual earnings. When a business is generating consistent profits, the PE ratio provides a straightforward way to judge whether you are paying a reasonable price for those earnings compared to other investment options.

However, what counts as a “normal” or “fair” PE ratio depends on several factors, especially growth expectations and risk levels. Fast-growing companies typically warrant higher PE ratios since investors are willing to pay more for future earnings potential. Conversely, companies facing greater risks or slower growth usually trade at lower multiples.

Sprinklr currently trades at a PE ratio of 15.5x. To put that in context, the industry average for software stocks sits much higher at 35.6x. The average among Sprinklr’s peers is an even loftier 105.7x. While these figures may suggest Sprinklr is cheap, broad benchmarks can be misleading for individual companies.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio for Sprinklr is calculated to be 11.3x, using an in-depth assessment of earnings growth, profit margins, industry conditions, market cap, and underlying risks. Unlike basic peer or industry comparisons, the Fair Ratio is tailored to the company’s true fundamentals and provides a more balanced sense of fair value.

Sprinklr’s actual PE ratio of 15.5x is just above its Fair Ratio. This implies the stock is trading at a slight premium. The difference is close enough to suggest the price is essentially in line with fair value for its financial profile.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sprinklr Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story about a company; it’s where you connect your view of Sprinklr’s potential (or risks) to numbers like fair value, future revenue and profit margins. Narratives bridge the gap between the qualitative (what’s happening in the business) and the quantitative (financial forecasts and estimated valuations), giving you a clear rationale for your investment stance.

Rather than just relying on static ratios or models, Narratives are an accessible tool available on Simply Wall St’s Community page, used by millions of investors. With a Narrative, you can track how your outlook translates into fair value, see how it compares to the current share price, and make more informed buy or sell decisions. Since Narratives update dynamically with every major news item or earnings release, your valuation always reflects the latest context.

For Sprinklr, as an example, one investor might create an optimistic Narrative around accelerated AI integration and international expansion, justifying a fair value of $17.00 per share. Another investor, focused on margin pressures and customer concentration risk, projects a fair value as low as $8.00. Narratives make these perspectives transparent and easy to compare, all in one place.

Do you think there's more to the story for Sprinklr? Create your own Narrative to let the Community know!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com