21Vianet Group Inc (NASDAQ:VNET), a internet software and services company based in China, saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. As a small cap stock, hardly covered by any analysts, 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? Let’s take a look at VNET’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for 21Vianet Group
What is VNET worth?
Good news, investors! VNET is still a bargain right now. In this instance, I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that VNET’s ratio of 0.9x is below its peer average of 4.6x, which suggests the stock is undervalued compared to the internet software and services industry. However, given that VNET’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 VNET look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at VNET future expectations. Though in the case of VNET, it is expected to deliver a relatively unexciting top-line growth of 0.62% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for VNET, at least in the near term.
What this means for you:
Are you a shareholder? Since VNET is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on VNET for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy VNET. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on 21Vianet Group. You can find everything you need to know about VNET in the latest infographic research report. If you are no longer interested in 21Vianet Group, 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.