Why PagerDuty Stock Just Crashed

Core Viewpoint - PagerDuty's stock experienced a significant decline of 25.7% following the release of its mixed Q3 earnings report, despite exceeding earnings expectations [1][2]. Financial Performance - PagerDuty reported an adjusted earnings per share of $0.33, surpassing analysts' expectations of $0.24, while sales were slightly below expectations at $124.5 million compared to the anticipated $124.9 million [2][3]. - Year-over-year sales growth was recorded at 5%, and the company achieved its second consecutive quarter of GAAP profitability, with an operating profit margin of 6.5% and GAAP earnings of $1.69 per share [3]. - The actual free cash flow for the quarter was $20.9 million, significantly lower than the reported net income of $161.6 million [4]. Market Metrics - PagerDuty's current market capitalization stands at approximately $1 billion, with a price-to-free cash flow ratio of 8.8x based on a free cash flow of $117.6 million for the year [6]. - The stock is currently trading within a 52-week range of $11.13 to $21.98, with a current price of $11.47 after a decline of $3.71 [5][6]. Investment Outlook - Despite the recent sell-off, the stock is viewed as a potential small-cap buy, especially considering a modest projected growth rate of 9% [7].