BlackLine has been treading water for the past six months, recording a small loss of 3.7% while holding steady at $49.33.

Is there a buying opportunity in BlackLine, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

We're cautious about BlackLine. Here are three reasons why we avoid BL and a stock we'd rather own.

Why Is BlackLine Not Exciting?

Started in 2001 by software engineer Therese Tucker, one of the very few women founders who took their companies public, BlackLine (NASDAQ: BL) provides software for organizations to automate accounting and finance tasks.

1. Weak Billings Point to Soft Demand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

BlackLine’s billings came in at $207.3 million in Q4, and over the last four quarters, its year-on-year growth averaged 6.7%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers.

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 BlackLine’s revenue to rise by 7.4%, a deceleration versus its 15.3% annualized growth for the past three years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

3. Free Cash Flow Projections Disappoint

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.

Over the next year, analysts’ consensus estimates show they’re expecting BlackLine’s free cash flow margin of 25.1% for the last 12 months to remain the same.

Final Judgment

BlackLine isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 5.3× forward price-to-sales (or $49.33 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. We’d recommend looking at the most dominant software business in the world.

Stocks We Like More Than BlackLine

The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.

Get started by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.