In a sliding market, Box has defied the odds, trading up to $38.98 per share. Its 21.6% gain since December 2024 has outpaced the S&P 500’s 1.8% drop. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy Box, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Box Not Exciting?
We’re happy investors have made money, but we're cautious about Box. Here are three reasons why we avoid BOX and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Box grew its sales at a weak 6.6% compounded annual growth rate. This was below our standard for the software sector. 
2. Projected Revenue Growth Is Slim
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.
Over the next 12 months, sell-side analysts expect Box’s revenue to rise by 7.7%, close to This projection doesn't excite us and indicates its newer products and services will not lead to better top-line performance yet.
3. Cash Flow Margin Set to Decline
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Over the next year, analysts predict Box’s cash conversion will slightly fall. Their consensus estimates imply its free cash flow margin of 27.2% for the last 12 months will decrease to 27.4%.
Final Judgment
Box’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 4.9× forward price-to-sales (or $38.98 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at the Amazon and PayPal of Latin America.
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