Asure trades at $8.21 per share and has stayed right on track with the overall market, losing 5.3% over the last six months while the S&P 500 is down 6.9%. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Asure, 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.
Even with the cheaper entry price, we're cautious about Asure. Here are three reasons why we avoid ASUR and a stock we'd rather own.
Why Is Asure Not Exciting?
Created from the merger of two small workforce management companies in 2007, Asure (NASDAQ: ASUR) provides cloud based payroll and HR software for small and medium-sized businesses (SMBs).
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.
Asure’s billings came in at $37.28 million in Q4, and over the last four quarters, its year-on-year growth averaged 6.9%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
2. Shrinking Operating Margin
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.
Looking at the trend in its profitability, Asure’s operating margin decreased by 6.4 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Asure’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was negative 9%.
3. Cash Burn Ignites Concerns
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.
While Asure posted positive free cash flow this quarter, the broader story hasn’t been so clean. Asure’s demanding reinvestments have consumed many resources over the last year, contributing to an average free cash flow margin of negative 1.2%. This means it lit $1.24 of cash on fire for every $100 in revenue.
Final Judgment
Asure isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 1.8× forward price-to-sales (or $8.21 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Would Buy Instead of Asure
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. 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.
