NetScout Systems Inc (NASDAQ:NTCT), a communications company based in United States, saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $31.3 and falling to the lows of $25.5. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether NetScout Systems’s current trading price of $26 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 NetScout Systems’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for NetScout Systems
What’s the opportunity in NetScout Systems?
According to my valuation model, NetScout Systems seems to be fairly priced at around 18.89% below my intrinsic value, which means if you buy NetScout Systems today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $32.06, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that NetScout Systems’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will NetScout Systems generate?
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. Though in the case of NetScout Systems, it is expected to deliver a highly negative earnings growth in the next few 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? Currently, NTCT appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 NTCT 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. Furthermore, 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 gel your views on NTCT should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on NetScout Systems. You can find everything you need to know about NetScout Systems in the latest infographic research report. If you are no longer interested in NetScout Systems, 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.