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What Does Pure Storage, Inc.'s (NYSE:PSTG) Share Price Indicate?

Simply Wall St

Pure Storage, Inc. (NYSE:PSTG), which is in the tech business, and is based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Pure Storage’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Pure Storage

What's the opportunity in Pure Storage?

According to my valuation model, Pure Storage seems to be fairly priced at around 15% below my intrinsic value, which means if you buy Pure Storage today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $20.11, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Pure Storage’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 the stock moves relative to the rest of the market.

What does the future of Pure Storage look like?

NYSE:PSTG Past and Future Earnings, September 27th 2019

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. Pure Storage’s earnings over the next few years are expected to increase by 47%, 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 PSTG’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? 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 PSTG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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 Pure Storage. You can find everything you need to know about Pure Storage in the latest infographic research report. If you are no longer interested in Pure Storage, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.