U.S. Markets open in 4 hrs 26 mins

Is Lumentum Holdings Inc. (NASDAQ:LITE) Potentially Undervalued?

Simply Wall St

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Lumentum Holdings Inc. (NASDAQ:LITE), which is in the communications business, and is based in United States, received a lot of attention from a substantial price increase on the NASDAQGS 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? Today I will analyse the most recent data on Lumentum Holdings’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Lumentum Holdings

What's the opportunity in Lumentum Holdings?

Good news, investors! Lumentum Holdings is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $100.27, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Lumentum Holdings’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 kind of growth will Lumentum Holdings generate?

NasdaqGS:LITE Past and Future Earnings, June 25th 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. Lumentum Holdings’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since LITE is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic 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 capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on LITE for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LITE. 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 Lumentum Holdings. You can find everything you need to know about Lumentum Holdings in the latest infographic research report. If you are no longer interested in Lumentum Holdings, 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.