Procore has been treading water for the past six months, recording a small loss of 3.6% while holding steady at $72.16. The stock also fell short of the S&P 500’s 6.9% gain during that period.
Is now the time to buy Procore, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Procore Not Exciting?
We're sitting this one out for now. Here are two reasons why PCOR doesn't excite us and a stock we'd rather own.
1. Operating Losses Sound the Alarms
While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain 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.
Procore’s expensive cost structure has contributed to an average operating margin of negative 12.9% over the last year. Unprofitable, high-growth software companies require extra attention because they spend heaps of money to capture market share. As seen in its fast historical revenue growth, this strategy seems to have worked so far, but it’s unclear what would happen if Procore reeled back its investments. Wall Street seems to be optimistic about its growth, but we have some doubts.
2. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Procore has shown mediocre cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.8%, subpar for a software business.
Final Judgment
Procore isn’t a terrible business, but it doesn’t pass our bar. With its shares trailing the market in recent months, the stock trades at 8.2× forward price-to-sales (or $72.16 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Procore
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
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