Is Mimecast Limited (NASDAQ:MIME) Potentially Undervalued?
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Mimecast Limited (NASDAQ:MIME), which is in the software business, and is based in United Kingdom, saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Mimecast’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Mimecast
What's the opportunity in Mimecast?
The stock is currently trading at US$45.12 on the share market, which means it is overvalued by 29.31% compared to my intrinsic value of $34.89. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Mimecast’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 Mimecast 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. 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 the company's future expectations. In Mimecast’s case, its revenues over the next few years are expected to grow by 50%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in MIME’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MIME should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on MIME for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for MIME, which means it’s worth diving deeper into other factors 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 Mimecast. You can find everything you need to know about Mimecast in the latest infographic research report. If you are no longer interested in Mimecast, 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.
