ZoomInfo Technologies Inc. (ZI) in Vancouver, Wash., is a global leader in contemporary go-to-market software, analytics, and insight for over 25,000 businesses. The company's cloud-based platform provides information on organizations to assist users in identifying target customers and decision-makers, obtaining constantly updated predictive lead and company scoring, crafting messages, engaging through automated sales tools, and tracking progress through the deal cycle.

The stock is down 41.9% in price year-to-date and 22.3% over the past month to close yesterday's trading session at $37.29. In addition, the stock is currently trading 53.2% below its 52-week high of $79.17, which it hit on Nov. 19, 2021.

While the company saw a more than 100% growth in customers using the combined SalesOS platform, Engage, and Chorus solutions in its last reported quarter, the stock was recently downgraded by analysts at TheStreet to "d" rating  from a "c-" rating. In addition, Wells Fargo lowered its price target on the stock from $80 to $70.

Here is what could shape ZI's performance in the near term:

Mixed Profitability

ZI's $311.40 million trailing-12-months cash from operations is 18.1% higher than the  $263.72 million industry average. Its trailing-12-months gross profit margin, levered FCF margin, and ROC are 70.9%, 343%, and 1.8% higher than their respective industry averages. However, its 0.18%  trailing-12-months asset turnover ratio is 61.9% lower than the 0.46%  industry average. Also, its trailing-12-months ROA and CAPEX/Sales multiple are 39.1% and 31.4% lower than their respective industry averages.

Premium Valuation

In terms of forward Non-GAAP P/E, the stock is currently trading at 47.82x, which is 161.9% higher than the 18.26x industry average. Also, its 13.94x forward EV/Sales is 567.6% higher than the 2.09x industry average. Furthermore, ZI's 6.51x forward Price/Book is 208.9% higher than the 2.11x industry average.

Consensus Rating and Price Target Indicate Potential Upside

Among the 12 Wall Street analysts that rated ZI, 11 rated it Buy, and one rated it Hold. The 12-month median price target of $71 indicates a 90.4% potential upside. The price targets range from a low of $64.00 to a high of $81.00.

POWR Ratings Reflect Uncertainty

ZI has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ZI has a D grade for Value and a C for Quality. The company's higher-than-industry valuation is consistent with the Value grade. In addition, its mixed profitability is in sync with the Quality grade.

Among the 157 stocks in the F-rated Software – Application industry, ZI is ranked #79.

Beyond what I have stated above, you can view ZI ratings for Growth, Stability, Momentum, and Sentiment here.

Click here to check out our Software Industry Report for 2022

Bottom Line

While the company has taken several strategic steps  to boost its operational growth, its premium valuation and mixed profitability may limit its growth in the near term. Furthermore, the stock is currently trading below its 50-day and 200-day moving average of $50.64 and $58.73, respectively, indicating a downtrend. So, we believe investors should wait before scooping up its shares.

How Does ZoomInfo Technologies Inc. (ZI) Stack Up Against its Peers?

While ZI has an overall C rating, one might want to consider its industry peer, Commvault Systems Inc. (CVLT), Rimini Street Inc. (RMNI), and Progress Software Corporation (PRGS), which has an overall A (Strong Buy) rating.

ZI shares were trading at $39.72 per share on Friday morning, up $2.43 (+6.52%). Year-to-date, ZI has declined -38.13%, versus a -13.02% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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