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A look at the correlation between sales growth and APPN stock valuation

Appian Corporation (NASDAQ: APPN) is a cloud computing and enterprise software company. APPN sells a platform as a service for building enterprise software applications. It focuses on the low-code development, business process management, and case management markets. Appian helps companies build applications and workflows quickly with a low-code automation platform. This morning APPN is up 0.7% to $ 82.10.

APPN is up about 54% over the past 12 months, trading nearly 87% from its 52-week low of $ 44.03. On the flip side, Appian’s shares are up more than 49% so far in 2021. APPN is also down nearly 70% from a record high of $ 260.00, hit four months ago before the stock sold off.

When checking in earnings, Appian has exceeded Wall Street earnings expectations in all four of its most recent earnings reports. While the company delivered positive earnings per share (EPS) for its shareholders in the second and third quarters of 2020, Appian stock’s EPS has fallen into negative territory for the past two quarters. Despite outperforming analyst expectations in both quarters, earnings fell to $ 0.03 per share in the fourth quarter of 2020 and again to $ 0.06 in the first quarter of 2021. Currently, analysts are predicting that Appian will see a significant drop in EPS for the second quarter of 2021, down to $ 0.23.

Basically, the Appian Corporation is not growing fast enough to guarantee its market cap of $ 5.77 billion. APPN’s revenue for 2020 was $ 304.5 million. It is entirely possible that this sales figure is a major contributor to Appian stock’s sharp decline over the past few months. It wouldn’t be surprising if Appian’s stock price fell even further in the short term to negotiate and reflect a more reasonable value for the company.

Now it seems like a great opportunity to weigh APPN’s next step with options. The security’s 73% Schaeffer Volatility Index (SVI) is in the low 18th percentile of its annual range, indicating that option players are now pricing in low volatility expectations.

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