Perion Network Ltd. (NASDAQ:PERI), which is in the media business, and is based in Israel, led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Perion Network’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in Perion Network?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.29x is currently trading slightly above its industry peers’ ratio of 14.25x, which means if you buy Perion Network today, you’d be paying a relatively reasonable price for it. And if you believe Perion Network should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Perion Network’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Perion Network?
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. Perion Network’s earnings over the next few years are expected to increase by 41%, 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? It seems like the market has already priced in PERI’s positive outlook, 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 PERI? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on PERI, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for PERI, which means it’s worth diving deeper into 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 Perion Network. You can find everything you need to know about Perion Network in the latest infographic research report. If you are no longer interested in Perion Network, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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