At $6.23, Is It Time To Buy Fitbit Inc (FIT)?
Fitbit Inc (NYSE:FIT), a electronic equipment, instruments and components company based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at FIT’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Fitbit
What is FIT worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.8x is currently trading slightly below its industry peers’ ratio of 2.2x, which means if you buy FIT today, you’d be paying a relatively reasonable price for it. And if you believe that FIT should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since FIT’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much FIT moves relative to the rest of the market.
What does the future of FIT look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. FIT’s earnings over the next few years are expected to increase by 68.08%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? FIT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at FIT? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on FIT, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for FIT, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Fitbit. You can find everything you need to know about FIT in the latest infographic research report. If you are no longer interested in Fitbit, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
