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When Should You Buy Proofpoint, Inc. (NASDAQ:PFPT)?

Simply Wall St
·4 mins read

While Proofpoint, Inc. (NASDAQ:PFPT) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQGM over the last few months, increasing to US$125 at one point, and dropping to the lows of US$102. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Proofpoint's current trading price of US$105 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Proofpoint’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Proofpoint

What is Proofpoint worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.4% below my intrinsic value, which means if you buy Proofpoint today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $108.05, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Proofpoint’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Proofpoint?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with a negative profit growth of -1.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Proofpoint. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? PFPT seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on PFPT for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on PFPT should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Proofpoint has 3 warning signs we think you should be aware of.

If you are no longer interested in Proofpoint, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.