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Should You Investigate Micro Focus International plc (LON:MCRO) At UK£10.79?

Simply Wall St

Micro Focus International plc (LON:MCRO), which is in the software business, and is based in United Kingdom, saw significant share price movement during recent months on the LSE, rising to highs of UK£11.48 and falling to the lows of UK£10.04. 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 Micro Focus International's current trading price of UK£10.79 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 Micro Focus International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Micro Focus International

Is Micro Focus International still cheap?

Good news, investors! Micro Focus International is still a bargain right now. According to my valuation, the intrinsic value for the stock is £15.17, but it is currently trading at UK£10.79 on the share market, meaning that there is still an opportunity to buy now. However, given that Micro Focus International’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Micro Focus International look like?

LSE:MCRO Past and Future Earnings, December 30th 2019
LSE:MCRO Past and Future Earnings, December 30th 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. Though in the case of Micro Focus International, it is expected to deliver a negative revenue growth of -0.8% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although MCRO is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to MCRO, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on MCRO for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Micro Focus International. You can find everything you need to know about Micro Focus International in the latest infographic research report. If you are no longer interested in Micro Focus International, 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 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.

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. Thank you for reading.