Twilio (NYSE:TWLO) has suffered a fate similar to so many tech companies as of late. TWLO stock has lost precisely half its value over the past 12 months. And it’s down 60% from its 52-week highs. In dollar terms, Twilio has sunk from a peak of $457 to just $180 or so today.

In a vacuum, Twilio’s fall would seem catastrophic. However, it’s actually not that different from many other cloud and software-as-a-service (SaaS) stocks. Given that the sector has plummeted, it’s a good time to start going shopping for discounts. So how does Twilio stack up compared to other SaaS names that have seen similar declines?

TWLO Stock Value Proposition

Twilio is one of the leading communication-as-a-service providers. It offers solutions for email, voice, text messages, and chat among other functions. Originally some analysts pigeonholed Twilio as primarily just a text or chat platform. However, given its acquisitions and product development, TWLO Stock has developed a robust broad communications ecosystem that should thrive regardless of which sorts of digital channels are most popular with consumers.

Additionally, Twilio beefed up its capabilities with a major acquisition. In late 2020, it bought Segment, which is a customer data platform (CDP). Segment allows advertisers to collect, clean, and control customer data. That, when combined with marketing across all digital channels, can create a powerful tool for advertisers.

Part of Twilio’s appeal is that it has detailed application performance interfaces (APIs). These allow developers to build their own unique pieces of software on top of Twilio’s stack. This sort of customization gives Twilio more uses than a rival simple one-size fits all sort of solution.

Reconsidering Valuations During A Tech Bear Market

During the software bull market, traders tended to only focus on the upside. It’s easy to come up with a great story for these sorts of companies. Acquisitions layer on additional services and niches on top of the existing ecosystem. More user adoption of digital tools expands the total addressable market. And international growth adds another path to success.

During software bear markets, however, that blue sky thinking goes out the window. Instead, people just focus on the fundamentals in the here and now. Is the company profitable? Does it generate cash flow? Is it consistently positive on an EBITDA basis?

How Twilio Stacks Up

For Twilio, we see a mixed result. The company has historically been unprofitable on an accounting basis. Analysts project it to remain unprofitable in 2022 and 2023 as well, though it should reach profitability in 2024 according to the current analyst consensus. To Twilio’s defense, however, some of its lackluster profitability has come from making acquisitions such as Segment which don’t produce profits from day one but greatly add to its long-term revenue and profit potential.

On an EBITDA basis, TWLO stock has struggled as well. EBITDA had been running around minus $200 million annually but has fallen to an EBITDA loss of more than $500 million over the past 12 months. Again, it appears much of this is tied to recent acquisitions and growth initiatives during the pandemic which will take more than a few months to pay off.

Finally, and more encouragingly, on a free cash flow basis, Twilio is running close to break-even. It’s not yet consistently cash flow positive after investments, but it’s not running sizable losses.

Still, in this new sort of market, investors are demanding positive numbers in terms of cash flow or profitability. Instead of valuing companies solely on revenues, folks want more concrete metrics such as cash flow. Given Twilio’s inability to produce these metrics as of yet, it’s harder to establish a clear floor for Twilio’s stock price as opposed to some of its software rivals.

TWLO Stock Verdict

By all accounts, Twilio is a fine business that has done a great job expanding its product offering. As long as management keeps making shrewd acquisitions and finds new verticals to reach, it should be able to grow topline revenues at an agreeable pace.

The real question will be in terms of the other metrics. When can TWLO stock start reliably producing free cash flow and/or positive earnings per share? In a tech bear market, the story matters less than actual results. Twilio still has a compelling long-term vision in terms of offering communication services. But until Twilio can attach some stronger financial results to that vision, its share price could lag stronger peers.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.