SCWorx Corp. (WORX) in New York City provides software-as-a-service-based solutions to healthcare companies in the United States. Its solution modules include its virtual item master, its contract management and request for pricing module, its data interoperability module, its automated item add portal, its virtual general ledger and data analytics module.
Shares of WORX have plummeted 31.2% in price over the past year and 29.7% year-to-date.
Multiple lawsuits filed against the company and its weak financials and poor growth prospects have caused investors to adopt a bearish sentiment.
Here is what could shape WORX’s performance in the near term:
Risk Factors
In its 2021 annual report, WORX stated that it faced several risks and uncertainties. The company faces the risk of being unable to reverse the latest decline in its revenues and resume its growth trajectory. Also, WORX’s ability to resolve various pending litigation and investigations is uncertain. Given its latest operational challenges, WORX might find it challenging to obtain additional financing in sufficient amounts or on acceptable terms to fund its working capital expenses and capital expenditures. The company has yet to generate operating profits. Furthermore, as per its management commentary, WORX might continue to incur losses in the foreseeable future.
Going Concern Operations
In its latest annual report, WORX’s management raised concerns regarding the ability to continue operating as a going concern. The company does not have sufficient capital resources from operations and existing financing arrangements to meet its operating expenses and working capital requirements. As of Dec. 31, 2021, WORX’s working capital deficit stood at $1.53 million, and its accumulated deficit stood at $24.01 million. And during the year ended Dec. 31, 2021, WORX’s net loss and operating cash outflow amounted to $3.81 million and $1.07 million, respectively.
Pending Approval from SEC
On April 14, WORX announced that it reached an agreement in principle to resolve an SEC matter arising from its April 13, 2020, press release. According to the terms of the agreement, WORX is required to pay a civil monetary penalty of $125,000 in installments. However, the SEC has yet to approve the agreement. Also, the settlement is subject to the negotiation and court approval of a consent judgment.
The company had previously received a Wells Notice from the SEC staff last December, in which the staff recommended the SEC file an enforcement action against WORX and seek, among other things, an injunction, fines, and disgorgement.
POWR Ratings Reflect Bleak Prospects
WORX has an overall D rating, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an F for Stability and a D for Value and Quality. Its 3.28 beta justifies its Stability grade. In addition, the stock’s EV/EBITDA multiple is negative 3.14, which is in sync with the Value grade. Also, WORX’s trailing-12-month net income margin and ROE are negative 82.34% and 62.85%, respectively, in sync with the Quality grade.
Among the 167 stocks in the F-rated Software – Application industry, WORX is ranked #141.
Beyond what I have stated above, view WORX ratings for Growth, Momentum, and Sentiment here.
Click here to check out our Software Industry Report for 2022
Bottom Line
WORX’s business is subject to several risks. While the company has settled multiple class-action lawsuits over the past two months, it still has various pending litigation proceedings. In addition to this, WORX’s limited funding has raised concerns regarding its ability to operate as a going concern. Hence, we think the stock is best avoided now.
How Does SCWorx (WORX) Stack Up Against its Peers?
While WORX has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Commvault Systems, Inc. (CVLT), Rimini Street Inc. (RMNI), and Progress Software Corporation (PRGS), which have an A (Strong Buy) rating.
WORX shares were trading at $0.95 per share on Thursday morning, down $0.02 (-2.06%). Year-to-date, WORX has declined -26.36%, versus a -5.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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