Zacks names AI beauty solutions developer's stock undervalued

Perfect Corp went public on the New York Stock Exchange in November 2022 / Photo: Perfect Corp

Analysts at Zacks Small-Cap Research have labeled the stock of Perfect Corp, a developer of AI-based beauty solutions, as undervalued. According to them, the company’s shares should be priced at a minimum of $2.86, which represents a 55% growth potential from the closing price on June 20.

Details

Perfect Corp’s shares should be valued at a minimum of $2.86 each, according to Zacks SCR analysts. Perfect Corp is a provider of SaaS solutions (Software as a Service, a model where customers are provided with a ready-to-use software application) for businesses and consumers. Therefore, it should be evaluated similarly to other companies in this segment, explains Zacks SCR. The fair capitalization of such companies, according to analysts, should be based on the EV/Sales ratio (i.e., the ratio of the company’s value to revenue), which averages 5 in the sector.

Perfect Corp’s value is only $30 million (its capitalization of $187.4 million minus $157 million on accounts), according to Zacks SCR’s calculations. With revenue of $53.3 million in 2023, the EV/Sales ratio is 0.56. Perfect Corp deserves an EV/Sales ratio of at least 2.5, the analysts say. This means the capitalization should reach $291 million or $2.86 per share, they conclude.

On Friday, June 21, the company’s stock price increased by more than 5% in pre-market trading, and during the main session, it grew by about 0.2%.

What Perfect Corp does

Perfect Corp develops AI and augmented reality solutions for the beauty and fashion industries in two segments: for brands (B2B) and for consumers (B2C). To brands, Perfect Corp sells products that enable virtual skin diagnostics, cosmetic selection, or virtual glasses fitting. For consumers, the company offers an application called YouCam, which allows users to “dress up” in photos or change the background.

In the first quarter of 2024, Perfect Corp’s revenue was $14.3 million, an increase of 17.7% compared to the previous year.

Analyst insights

According to MarketWatch, the company is followed by one analyst. His recommendation is to hold the stock, with a target price of $3.06.