Activist pressure puts BlackLine in focus

Engaged Capital’s plan to launch a proxy fight at BlackLine (BL), seeking four board seats and pushing for a possible sale, has quickly put the accounting software company under closer investor scrutiny.

The stock’s recent 1 day share price return of 1.61% and 7 day share price return of 6.07% suggest momentum picked up around the Engaged Capital announcement, although a 16.85% 90 day share price return contrasts with a weaker 3 year total shareholder return of 18.60% and 5 year total shareholder return of 54.27%.

If this kind of activist story has your attention, it could be a good time to broaden your search and check out high growth tech and AI stocks.

With BlackLine trading at US$57.50, sitting at roughly a 7% discount to the average analyst target and a 41% gap to one estimate of intrinsic value, you have to ask: is there real upside here, or is the market already pricing in future growth?

Most Popular Narrative: 7% Undervalued

With BlackLine last closing at US$57.50 against a narrative fair value of about US$61.83, the widely followed view prices in a modest gap that hinges on specific growth, margin and valuation assumptions rather than a dramatic mispricing.

The analysts have a consensus price target of $61.833 for BlackLine based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $80.0, and the most bearish reporting a price target of just $48.0.

Want to see what sits behind that relatively high future P/E, lower margin outlook and still supportive fair value estimate? The key assumptions may surprise you.

Result: Fair Value of $61.83 (UNDERVALUED)

However, that story can crack if slow revenue growth around 7% and pressure from large ERP competitors start to bite harder than analysts currently factor in.

Build Your Own BlackLine Narrative

If you are not fully on board with this view or simply prefer to work from the raw numbers yourself, you can build a custom thesis in just a few minutes: Do it your way.

A great starting point for your BlackLine research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If BlackLine has you thinking more broadly about your portfolio, this is a good moment to widen your search and stress test your next moves.

• Spot potential value in smaller names by scanning these 3527 penny stocks with strong financials that pair lower share prices with stronger underlying fundamentals.
• Target future facing themes by reviewing these 26 AI penny stocks that are tied to artificial intelligence trends across different industries.
• Hunt for possible mispricings by filtering for these 881 undervalued stocks based on cash flows that screen as attractive based on cash flow estimates.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.