Semrush’s stock price has taken a beating over the past six months, shedding 43.9% of its value and falling to $8.79 per share. This might have investors contemplating their next move.

Following the drawdown, is now an opportune time to buy SEMR? Find out in our full research report, it’s free.

Why Do Investors Watch SEMR Stock?

Started by Oleg Shchegolev while still in university, Semrush (NYSE: SEMR) is a software-as-a-service platform that helps companies optimize their search engine and content marketing efforts.

Three Positive Attributes:

1. Billings Surge, Boosting Cash On Hand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Semrush’s billings punched in at $113.1 million in Q1, and over the last four quarters, its year-on-year growth averaged 24.8%. This performance was impressive, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

2. Projected Revenue Growth Is Remarkable

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.

Over the next 12 months, sell-side analysts expect Semrush’s revenue to rise by 18.7%. While this projection is below its 24.5% annualized growth rate for the past three years, it is commendable and indicates the market is baking in success for its products and services.

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

What makes the software-as-a-service model so attractive is that once the software is developed, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

Semrush’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 82.1% gross margin over the last year. Said differently, roughly $82.15 was left to spend on selling, marketing, and R&D for every $100 in revenue.

Final Judgment

Semrush possesses several positive attributes. With the recent decline, the stock trades at 2.8× forward price-to-sales (or $8.79 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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