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As the enterprise technology sector continues to grow, investors may be interested in diversifying their portfolios with some of the unique technology companies providing innovative solutions to leading US companies. Exela Technologies Inc. (NASDAQ: XELA) is a leader in business process automation, providing solutions to more than 60% of the Fortune 100. Is XELA stock a good buy in 2022? Find out in the XELA stock forecast below.
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What does Exela do?
Exela provides business process automation tools to more than 4,000 enterprise customers in 50 countries. Business process automation can be simply defined as reducing the need for human intervention by using technology for business tasks and processes.
Some of the products that Exela provides to its customers include HR solutions, authorized digital signature solutions, social intelligence platform and end-to-end integrated marketing solutions.
The company is currently based in Irving, Texas, and employs over 22,000 people.
XELA stock price history
Exela was launched as a blank check company named Quinpario on July 15, 2014, trading on its cash in the range of $500-$600. The company grew for nearly three years until June 2017 when it experienced a dramatic year-long downturn after its merger with SourceHOV and Novitex.
The company name was changed upon merger to Exela Technologies Inc. The downtrend hit a low of $268 in May 2018. The stock then attempted to rally, hitting a local high of $427.80 in October 2018, but ultimately failed – since 2018, XELA stock has been steadily falling. Its current price as of November 1, 2022 is $0.23, down more than 99% from its 2018 high.
Is XELA Stock a good buy?
Is XELA stock undervalued? Some analysts think so, but not all agree. The company’s financials are bearish with an 8.96% drop in quarterly revenue and net profit down 308.94%. On the other hand, the company beat its first and second quarter earnings per share by 10.02% and 32.48%, respectively.
According to Utradea, XELA stock has a price/earnings ratio of 3 out of 5, which means that it is well valued compared to other companies in the sector. It also has a return on equity of 4 out of 5, which means it is undervalued compared to others in the space, due to a higher ROE. XELA stock has a current discounted cash flow valuation of 5, which suggests the stock may have strong fundamentals.
InvestorsObserver analysts rate XELA stock as a buy with a long-term score of 67 out of 100. They are less optimistic in the short term, giving it a short-term score of 8 out of 100.
2022 has been a tough year for technology companies in general, with the S&P 500 information technology sector down 21.62% this year as of November 1, 2022. If Exela starts to perform better and the market becomes more confident in the information technology sector, XELA stock could experience significant growth.
Should XELA stock finally come out of its slump, now would be a good time to buy, when the stock is cheap. While the possibility is unlikely, if the company ever hits its 2018 high again, an investor who buys now should see a net profit of over 150,000%.
Will XELA stock rise?
Several analysts say the stock may rise. Analysts polled by Nasdaq gave XELA stock a Buy recommendation, with a forecast of a $2 12-month price target. CNN analysts are even more optimistic, with a low 12-month target of $2 after a 782.6% rise, a median 12-month target of $2.50 after a 1,003.3% rise and a target high of $3 after a price increase of 1,223.9%.
If XELA stock reached a valuation of $3 in the next 12 months, $10,000 invested at current prices would earn the investor over $93,000 in profit.
Factors that may affect Exela shares
Recent leadership changes at Exela could have a long-term effect on the company’s valuation.
On April 30, 2022, Ronald Cogburn, CEO of Exela since its IPO in 2017, stepped down. The company is now led by Par Chadha, the Executive Chairman. The future will tell if this change of direction will have a significant impact on the future of the company.
Exela recently sold its European division, XBP Europe, for a valuation of $220 million to CF Acquisition Corp VIII, a special-purpose acquisition company. The deal will close in the first half of 2023. Exela is still expected to own a majority share of XBP Europe when it goes public.
Divestments like this can help a company increase organizational efficiency and reduce operating debt, which can be good for the stock. A positive IPO for XBP Europe could also increase investor confidence in XELA, as the company will hold a majority share.
Does XELA Reverse Split?
On July 25, 2022, Exela’s board of directors announced that the company would conduct a 1-20 reverse split to comply with NASDAQ listing requirements and to improve the stock’s marketability and liquidity. The split took effect at 5 p.m. on the same day, and shares began trading at the split-adjusted levels the next day when the market opened.
Unfortunately, the reverse split was not effective in boosting stock prices, as XELA stock fell over 25% in response to the news. No further reverse splits have been announced since then.
Take away food
XELA stock may be an attractive opportunity for investors looking for undervalued tech stocks. Although the company may not be considered a blue chip security – a safe and reliable investment – it can be a good opportunity for significant profits for investors who can bear a little more risk. A possible future rise in finances and a long list of clients could make it a good stock to watch.
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