Shares of Coupa Software (COUP 0.37%) were soaring 38% this week compared to where they closed last Friday, according to data from S&P Global Market Intelligence, as speculation over a potential buyout lifted the stock of the business spending-management software specialist.
Private equity firm Vista Equity Partners was reportedly looking to acquire the company, according to Bloomberg, which has seen rising revenue and bookings lately even though the stock has tanked for most of the year. The stock was down 77% in 2022 before news of a potential takeover bid emerged.
Vista Equity has been an active acquirer of technology stocks and Bloomberg says the shop was in active talks with Coupa, though no deal had been reached and no agreement could come of it. Of course, the speculation could spark other companies to rush into the void and make their own offers. Vista recently acquired KnowBe4 in a $4.6 billion deal.
Particularly in an economy such as what we’re experiencing now, where businesses need to watch every penny they spend, Coupa’s software that allows businesses to better track and manage their purchasing would make the company an attractive partner.
Coupa handily beat Wall Street’s top- and bottom-line expectations in the fiscal fourth quarter that ended July 31. It posted sales of $211 million, up 18% year over year, and earnings of $0.20 per share. Analysts had forecast revenue of $179 million and earnings of just $0.09 per share.
Coupa had been trading at around $45 a share before the takeover talk was reported, but analysts think any buyout would have to price the software stock anywhere between $70 per share and $90 per share to be agreeable. Coupa is currently trading at around $63 per share.
The business management software maker has a leading position in its industry and considering recent transactions in the space, anything less than that would likely be rejected.
Raymond James Financial analyst Brian Peterson tempers his bullish outlook for Coupa by noting that while its free cash flow margins of around 20% are enviable, it carries substantial net debt of around $1.3 billion. He would look for an expected offer price of between 7 times and 8 times sales as appropriate.
Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coupa Software. The Motley Fool has a disclosure policy.