While the broader market has struggled with the S&P 500 down 4.1% since September 2024, Procore has surged ahead as its stock price has climbed by 8.2% to $66.80 per share. This run-up might have investors contemplating their next move.

Is it too late to buy PCOR? Find out in our full research report, it’s free.

Why Do Investors Watch PCOR Stock?

Used to manage the multi-year expansion of the Panama Canal that began in 2007, Procore (NYSE: PCOR) offers a software-as-service project, finance, and quality management platform for the construction industry.

Three Things to Like:

1. ARR Surges as Recurring Revenue Flows In

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

Procore’s ARR punched in at $1.21 billion in Q4, and over the last four quarters, its year-on-year growth averaged 21.5%. This performance was impressive and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes Procore a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue.

2. Elite Gross Margin Powers Best-In-Class Business Model

Software is eating the world. It’s one of our favorite business models because once you develop the product, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

Procore’s gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an elite 82.2% gross margin over the last year. Said differently, roughly $82.22 was left to spend on selling, marketing, and R&D for every $100 in revenue.

3. Operating Margin Rising, Profits Up

Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.

Over the last year, Procore’s expanding sales gave it operating leverage as its margin rose by 10.9 percentage points. Although its operating margin for the trailing 12 months was negative 11.8%, we’re confident it can one day reach sustainable profitability.

Final Judgment

There are definitely things to like about Procore, and with its shares beating the market recently, the stock trades at 7.7× forward price-to-sales (or $66.80 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

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