Is Now An Opportune Moment To Examine ShotSpotter, Inc. (NASDAQ:SSTI)?
ShotSpotter, Inc. (NASDAQ:SSTI), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$39.32 at one point, and dropping to the lows of US$25.95. 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 ShotSpotter's current trading price of US$25.95 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ShotSpotter’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for ShotSpotter
Is ShotSpotter Still Cheap?
ShotSpotter is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 49.85x is currently well-above the industry average of 43.32x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that ShotSpotter’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 ShotSpotter look like?
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. Though in the case of ShotSpotter, it is expected to deliver a relatively unexciting earnings growth of 7.4%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? SSTI’s future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SSTI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 SSTI for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing ShotSpotter at this point in time. In terms of investment risks, we've identified 2 warning signs with ShotSpotter, and understanding them should be part of your investment process.
If you are no longer interested in ShotSpotter, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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